SINGAPORE: Information Technology (IT) infrastructure is one area that companies may need to focus on in any mergers and acquisitions deal.

Experts said there are many challenges to integrating the IT systems of acquired companies and these systems may well be key to supporting customer-friendly business processes.

Mergers and acquisitions give growth companies the opportunity to gain greater market share. But industry experts said M&A is not a strategy in itself - rather, it is a means to an end.

Kowshik Sriman, country head, SAP Singapore, said: "People go into M&A for the wrong reasons because they are trying to inflate the top line on a short-term basis.

"They actually could end up destroying values for their company, whereas people who do it for the right reasons and properly execute on their strategy are able to derive a lot of values for themselves and their shareholders."

It is important for companies to ensure that there is intrinsic synergy between newly merged firms, especially in the area of information technology.

According to SAP - a business software provider - there is a key role for IT to bridge the gap between a company's M&A strategy and its execution. This would allow senior executives to effectively implement their M&A strategies across the entire organisation.

"One of the key things that IT does is to create visibility for C-level executives. So if IT does not bridge that visibility gap, if people up there are not given relevant information on a timely fashion, then top executives are not able to make decisions for themselves," said Sriman.

Firms involved in M&As often face a challenge of consolidating the acquired company's IT infrastructure with their own.

Experts said streamlining IT infrastructure improves the effectiveness and efficiency of M&A deals. That is why it is important for companies to plan for their IT needs before executing any merger.

"Research and studies have shown us that companies have a much higher chance of success when they consider the IT aspect at a pre-merger stage, compared with companies that only look at IT as an after-thought. IT is so basic that we sometimes take it for granted," Sriman added.

For some companies, the savings from such synergies could be as much as US$4 million per day. With a faster integration of information systems, companies stand to derive more savings from their M&A deals.


- CNA/so