Unpredictable Reconfigurations: The Dilemma of the Post-Merger Information Systems Integration1

Introduction

Mergers and acquisitions (M&A) are a major strategic tool for achieving business growth (Schweiger & Goulet, 2000). At the end of 2011, global mergers investment represented approximately $1,000 billion (Gestrin, 2011). Given the scale of this activity, it is crucial for organizations to actually achieve the expected synergies – i.e., the actual net benefits in terms of reduced cost per unit and increased income – sought from combining the organizations (Larsson & Finkelstein, 1999).

PMI represents the process of strategic and structural combination of merging parties (Shanley & Correa, 1992). This process necessitates the post-merger reconfiguration the common use and sometimes the elimination of certain tangible and intangible resources of one or more of the merging entities (Karim & Mitchell 2000). The literature stresses the importance of the choice of integration approach as being one of the most important strategic decisions to make in mergers and represents a critical determinant of the post-merger outcomes (Pablo, 1994; Zollo & Singh, 2004). Different PMI approaches exist, which differ with respect to the extent of integration and autonomy among the merging parties (Ellis, 2004). Although a given type of PMI approach may be well suited to achieve synergy, it may also entail problems within the merging organizations, such as high levels of employee stress, job dissatisfaction, and resistance to the merger among employees (Larsson & Finkelstein, 1999).

Research on PMI reveals that when organizations try to manage differences among the merging parties, they face the dilemma of integration versus autonomy (Haspeslagh & Jemison, 1991). A number of researchers have addressed this dilemma by proposing four ideal-types of integration approaches based on strategic and organizational dimensions (Ellis, 2004). Preservation is deemed appropriate when there is a strategic need to maintain the sources of expected value-creation intact by preserving the boundary between the organizations. Absorption occurs when one of the firms imposes its work practices, norms and culture on the other parties. Symbiosis represents the approach in which the merging parties are gradually blended together by becoming increasingly interdependent. In transformation organizations are integrated by developing totally new, yet common, practices, culture and other organizational attributes (Marks & Mirvis, 2001).

The literature suggests that information technology (IT) is a key enabler of successful mergers (Henningsson & Yetton, 2011). A recent study suggests that 50-60% of the expected value from a merger is dependent on post-merger IT function integration especially the IT applications and data (Sarrazin & West, 2011). The integration of IT applications and data often involves the implementation of new ISs to span the boundaries of the previously independent organizations (Henningsson & Yetton, 2011). The main purpose of these systems is to facilitate the implementation of new organizational practices. Modern large organizations usually choose to implement off-the-shelf software applications such as Enterprise Systems (ES) (Wagner, Newell, & Piccoli, 2010). However, misalignments between industry-standard practices or “best practices” embedded in these ISs and the local idiosyncratic practices have caused headaches to management and IT implementation project teams (Sia & Soh, 2007).