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Top1. Introduction
Mergers and acquisitions (M&A) rank among the most noticeable developments in the corporate world and have attracted great attention from the academic community (e.g. Lin, Lo & Yang, 2010; Kovela & Skok, 2012). Neo-classical theory identifies M&A as a means to maximize shareholder wealth through harvesting synergies in operations and finance (Healy et al., 1992; Heron & Lie, 2002; Devos et al., 2009). Despite the large number of papers that discuss M&As, there is no clear position on their economic impact. Research suggests that M&As do not lead to spectacular results, and often bring negative financial performance to the acquiring firms (King et al., 2004). One of the most challenging tasks in a merger is to harvest the synergy effects, which greatly depend on change management strategies and processes (Ullah & Lai, 2013; Kansal & Chandani, 2014). In many cases, the promised efficiency gains or expected market share expansion cannot be achieved once the merger is completed (Klendauer & Deller, 2009).
The financial services industry is well researched regarding their M&A activities. It seems that financial services lend themselves to mergers – probably due to standardized service products and integrated back-office capacities. Also here, research is unclear about the outcome, but suggests that a good number of those mergers fail in realising their envisaged synergy potential (Amel et al., 2004; DeYoung et al., 2009). A very recent paper by Jap et al. (2016) studied the merger of ANZ New Zealand Australia and New Zealand Banking Group Limited (ANZ Group). The merger, so the authors state, was a major success thanks to “prioritizing the customer, addressing employees’ socioeconomic concerns, providing enough time and resources to ensure efficiencies…”. Synergies in information and human resources are seen as low hanging fruits and hence should be realised first. Interestingly though, the paper reports of a seamless integration of the information systems. Besides some undocumented extensions to the system and more time required than originally anticipated, the topic is not discussed further. Also, other case studies of M&A activities treat the information system integration as a black box (e.g. The Daimler-Chrysler and Warner-AOL mergers by Marks et al., 2014; Hirsch, 2015).
The successful integration of different information systems into one is a prerequisite for the realisation of efficiency gains. Still, the topic is often left out of discussions around merger activities, which are mainly driven by managerial considerations. This is surprising, as information technology - like any other business function - will search for ways to support newly established business processes and the new corporate strategy (Kaplan & Norton, 2006). This process, though, is not as clear-cut as it might seem and often provides major challenges for M&A activities.
This paper reports on a merger of two financial service companies in South Africa in 2010 that struggled seriously with integrating their information systems. Although the business case was presented in 2011 and the implementation started in 2012, by 2015 the system was still not operational – and the overall synergy gains remain far below expectations. The failure to integrate the information systems of both merging organizations caused major disruptions in their business activities and almost led to the failure of the merger altogether. This case provides insights into the difficulties and risks associated with information technology and responds to calls for more in-depth investigations of the non-financial aspects of M&As in general (e.g. Stahl et al., 2013).