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As organisations looked to ‘emerge stronger’ from the pandemic, we saw record numbers of mergers and acquisitions (M&A) through 2021. Since then, and despite global economic uncertainties, M&A activity has remained strong. In Q2 2023 there were approximately 232 mergers and acquisitions transactions in Australia, with a total transaction value of USD 13.8 billion1.
As we all know, technology plays a ubiquitous role in business, which includes M&A activities. From the industry trends and studies we have access to at Tecala, we estimate that around 50% to 80% of M&A deals involve technology as a key driver or enablement factor. This includes acquisitions for technological capabilities, digital transformation, innovation, and competitive positioning in rapidly evolving markets.
For both business and technology leaders, understanding the role technology plays in triggering a merger or acquisition, and the role it then plays in ensuring a successful M&A, is essential.
Technology can be the catalyst for a merger or acquisition. The acquisition of Booktopia by DigiDirect, for example, is getting lots of attention in Australian media. This acquisition includes both the assets and the business of Booktopia, which allows DigiDirect to diversify into a different market segment, while at the same time transforming its digital presence and fulfillment capabilities.
Talking in Inside Retail Australia2 DigiDirect owner, Shant Kradjan, explained that there are “significant opportunities” for shared expertise and efficiencies between Booktopia and DigiDirect. These opportunities likely refer to Booktopia's established warehouse, fulfilment, and distribution technology, which will boost DigiDirect's operational efficiency and evolve its business model.
In 2013, Woolworths acquired a 50% stake in data analytics startup Quantium to strengthen its data-driven decision-making capabilities. The acquisition was triggered by Woolworths’ need to harness advanced analytics to optimise customer insights, pricing strategies, and supply chain efficiencies. Quantium's expertise brought enhanced data analytics and artificial intelligence capabilities, empowering Woolworths to gain a competitive edge through deeper customer understanding and more informed strategic decisions.
"Advanced analytics is key to improving the experiences, ranges, and services we provide to our customers and the support we provide to our teams and suppliers," explained Woolworth’s Chief Executive Officer, Brad Banducci, at the time3.
Banducci went on to say that the way Woolworths gathers data, interprets it, and protects it, was becoming more important. A new business called ‘wiq’ has since been created, which combines the retailer’s advanced analytics and data science capabilities. The purpose of this initiative is to leverage data to solve complex retail problems and unlock value across the Woolworths Group4.
Successful mergers and acquisitions depend on many things. But due to the increasing reliance organisations have on their ICT platforms, technology is increasingly the make-or-break factor in their success.
It’s estimated that between 70% and 90% of M&As fail due to various factors and, according to the Harvard Business Review5, one of the most common reasons is technology integration issues.
Technology-related problems relate to the complicated nature of integrating the vast number of disparate systems, platforms, IT infrastructures, and data within each company. These will include compatibility, data consolidation and migration, legacy systems, governance and application rationalisation issues. Therefore, a thorough IT integration strategy developed early on in the M&A process will help ensure success and will save a lot of headaches as the M&A proceeds.
Tecala’s Managing Director, Pieter DeGunst explains: “Often organisations will do a thorough financial due diligence but only a limited technology due diligence. We can’t over-emphasise the importance of doing both.
“Evaluating the IT infrastructure, cybersecurity posture, the data landscape maturity, and digital assets is important. Too often organisations underbake these reviews, which at worst leads to a failed M&A. At best, the acquiring organisation or the merged entity just ends up inheriting many problematic issues.”
It's the role of the Technology Partner to guide M&A entities through this process. So let’s start at the beginning, before the M&A process gets underway.
Security Audits and Vulnerability Assessments ensure potential risks are identified and mitigated before the integration.
A Cyber Security Assessment will review the security framework already in place and assess its ability to deal with cyber threats and the processes in place to ensure business continuity in the event of an attack.
A Data Landscape Maturity Assessment will deliver a comprehensive review of the data landscape, along with an assessment of the systems, products, tools, and people that utilise the data, and an examination of specific purposes the organisation places on technology in relation to the data.
Ongoing Compliance Management through the M&A will help track and manage compliance with relevant regulations. This is particularly important in highly regulated environments, like Financial Services.
When these processes integrate advanced data analytics, artificial intelligence (AI), and machine learning tools, huge amounts of data can be reviewed to identify patterns, anomalies, and potential risks that might not be immediately apparent in a manual process.
Working together, these technologies enhance the efficacy of the due diligence process.
As the merger or acquisition proceeds, collaboration between different groups of people become critical. Increasingly, secure virtual data rooms are being set up to allow secure repositories for sharing documents and insights relating to the process.
Unified communication platforms and project management software, like Microsoft Teams and Microsoft Project, ensure seamless communication between teams working on the M&A. The real-time collaboration, document sharing, and virtual meetings enabled by these platforms all reduce both geographical and logistical challenges and make the coordination of tasks and timelines more efficient.
Once the merger or acquisition is complete, its success depends on how fast and seamlessly the organisation can integrate different platforms and systems.
With improving operational efficiencies, streamlining operations, and unlocking synergies being some of the main drivers of M&A, there’s always a focus on integrating enterprise resource planning (ERP) and merging customer relationship management (CRM) systems.
Integration Platforms as a Service (iPaaS) solutions will facilitate the integration of different applications and systems, ensuring seamless data flow and interoperability. This is particularly useful when integrating IT infrastructure and applications from both companies.
M&A administrators will also use specialised data migration tools and platforms to migrate data from disparate systems into a unified data base. Master data management solutions can be used to establish a single source of truth for all this merged data because, as we all know, effective decision making depends on the consistency and integrity data.
We’ve often written in our blogs about the importance of making people the focus of technology programs and initiatives, and M&A is no different.
At the end of the day, M&A is a period of widespread, rapid change which is usually felt most intensely by the employees. Change management tools can support people through the process by providing training, support, resources, and general updates where required.
By thoroughly assessing technology and the relationships, interconnections, and dependencies people have with technology throughout the merging organisations, employees will be able to navigate their shifting roles more easily and adapt to the new and emerging culture and expectations of the new organisation they’re transitioning into. And this will be a major factor in ensuring the continued growth of the new entity.
1 S&P Global, 2023.
2 Inside Retail Australia, 2024.
3 Reuters, 2021.
4 The Australian M&A Outlook, 2013.
5 Harvard Business Review, 2011.
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We’d have to think hard to remember a time when IT leaders weren’t being asked to ‘do more with less’. It’s part of the job description to find innovative ways to extract ‘optimal value’ from existing or shrinking budgets.
To understand how our operational landscape will influence the business cloud, and to explore how organisations should be using it, we sat down with Tecala’s Managing Director, Pieter DeGunst, to get his insights.
