Pros And Cons Of IT Acquisitions: A Beginners Guide

IT acquisitions and mergers are common these days due to enormous trade benefits such as less competition, bigger asset portfolio, better resource allocation, etc. Companies in the IT industry commonly form an alliance to collaborate their resources and form a bigger company, with a wider market capture and better products. It is also a common practice when two or more companies form an alliance to continue the business that is unable to self-sustain due to poor financial outcomes. This guide will give a glimpse about the various pros and cons of IT acquisitions, the importance of IT acquisition integration and key  for best results.

Pros And Cons Oof IT Acquisitions

Just like any other alliance, IT acquisitions are bound to present a few pros and cons to the entrepreneurs, employees, and other stakeholders of the company. Here are a few of them:

Pros Of IT acquisition

Here are some of the pros of acquiring or merging with another IT company:

• Market Capture And Power

One of the biggest and undisputed advantages of merging with another company is the increase in market share. Companies merging with other companies combine their individual market share to capture wider market and improving their presence in the industry. This gives the smaller competitors various challenges and increases barriers to entry for newcomers.

• Fewer Barriers To Entry

Mergers technically reduces the number of competitors in the market. When two or more IT companies merge, their conflict for greater market share than the other company turns into a mutual objective. The also increase in size considerably, making them a large player in the market, reducing the barriers to entry in newer markets.

• New And Better Resources

While every company strives to hire and retain the best talent available in the market, a merger gives the companies greater and wider access to a diverse talent pool. This means that they are able to improve their productivity and work efficiency by combining the new pool of talent. It also helps the company make use of various other combined resources that the company now has at their disposal. Meaning that a merger will considerably increase their technological resources, human resources, and other resources.

• Greater Capital

Needless to say, but merged organizations gain greater access to capital investments, which can improve their product development, research, and investing in new verticals quite easy.

Cons Of IT Acquisitions

Here are a few cons of IT acquisitions that an organization might face.

• Cultural Clashes

Every organization has its unique corporate culture that may not always coincide with the merged organization. This can lead to various conflicts between the employees and the management, and can result in poor work efficiency and low motivation level.

• Employee Turnover

Often, when two IT companies merge, they need to lay off a certain percentage of their employee force, as they are unable to create enough employment opportunities. For example, each organization may have similar talent pool with limited work requirements. In such cases, the company would retain the employee that is most suitable for the organization and terminate the services of the other.

• Conflicting Objectives

Every organization works to earn a profit, but at the same time, they often have a greater objective and vision for the organization, which might result in a conflict after a merger. This can lead to a chaotic situation and conflicts on the management level.

Importance of IT acquisition integration

When an organization is acquired of merged with another organization, there is an impending need to reap the benefits of the merger and take advantage of the new alliance. However, without adequate integration techniques and transition, the organizations would be unable to reap the benefits and would lose due to loss of productivity. According to studies, the integration process should be completed within the first 90 days of the merger to keep the organization’s identity and brand image strong in the market. Secondly, integration plays a critical role when it comes to work efficiency, resource allocation, lowering conflicts, and working towards a greater mission. The Integration process also helps in eliminating inefficiencies in the current system and optimize productivity by formulating policies and Standard Operating Procedures (SOPs) to ensure optimum resource output. Companies that are unable to integrate their resources, policies, SOPs, and organizational culture would continue to lose time and money.

Key Merger and acquisition engagements

Post a merger or acquisition, organization needs to implicate a series of engagements to ensure positive work culture, employee retention, and adequate allocation of resources. Here are a few tips for engagements post a merger or an acquisition:

• Redefined Organizational Objective

Every employee in an organization strives to contribute to the organizational objectives i.e. the vision and mission. However, after a merger, the organization and the employees would lack direction. Organizations need to redefine the new objectives and create awareness among the employees to improve concentration and motivation.

• Employee Career Path

One of the biggest distractions for employees posts a merger is the loss of direction and career path. With new and redefined objectives and visions, the employees would be unable to associate themselves with the organizational objective and would not understand the value of their contribution to the vision. Moreover, employees might lose a sense of their career progression in the organization due to the revised hierarchical system. For example, an employee who was expecting to become head of the department during the next promotion would be unable to understand how career progression will be affected after a merger. Therefore, companies need to offer career-counseling services to the employees and reassure their importance in the organization.