Diversification M&A

Question 1

Explain IT absorption as a strategy, as well as the business benefit and how IT is transformed using this acquisition strategy.

Answer 1

Scale - IT absorption: Applying your systems to the acquired company, expanding existing systems.

Question 2

Explain IT co-existence as a strategy, as well as the business benefit and how IT is transformed using this acquisition strategy.

Answer 2

Scope - IT co-existing: Processes are not similar to yours. Extending base of IT resources.

Question 3

Explain IT best-of-breed as a strategy, as well as the business benefit and how IT is transformed using this acquisition strategy.

Answer 3

Capability improvement - IT Best-of-Breed: Acquiring a company that does IT better than you. Integrate their systems in yours thereby enhancing your IT landscape.

Question 4

Explain IT renewal as a strategy, as well as the business benefit and how IT is transformed using this acquisition strategy.

Answer 4

Transformation - IT renewal: We can’t use either of the two companies’ IT systems so we have to redevelop the landscape. Mærsk acquiring P&O Nedlloyd.

Question 5

Mention the 4 acquisition strategies and their business benefits and IT Transformation types.

Answer 5

IT absorption (Scale & Expansion)
IT co-existing (Scope & Extension)
IT Best-of-Breed (Capability improvement & Enhancement)
IT renewal (Transformation & Redevelopment)

Question 6

Are the 4 acquisition strategies mutually exclusive?

Answer 6

No. Larger acquisitions typically entail mixes of IT integration strategies.

Question 7

What is dynamic misalignment?

Answer 7

The failure of aligning over a serial of acquisition.

• Inappropriate diagnosis or implementation can lead to dynamic misalignment by increasing complexity thus limiting flexibility  limited options for next acquisition.
• IT infrastructure is cumulative and should be rebuild to decrease complexity. HUGE PROJECT.
• Conclusion: Most serial acquirer are at some point forced to stop their acquisitions and restructure.
• However, for the individual acquisition, the effect is probably small.

Question 8

What is IT integration capabilities?

Answer 8

Diagnosis and Implementation.

Question 9

What are the four main benefits of M&A?

Answer 9

Scale
Scope
Capability Improvement
Transformation

Question 10

What are the 4 main strategies of M&A?

Answer 10

IT Absorption
IT co-existence
IT best-of-breed
IT renewal

Question 11

What are the four main IT transformation outcomes of M&A?

Answer 11

Expansion
Extension
Enhancement
Redevelopment