Unite and conquer -- maybe.

As numerous reports, articles and surveys show, mergers and acquisitions are more prevalent than ever. At least 30% of Global 2000 organizations are currently considering an acquisition, while another 40% are potential acquisition targets themselves. Critical mass in the global arena assures not only cultural diversity but also depth of resources. Today's economy is a global one where bigger really is better -- at least for the major players. And as Dennis Grimm pointed out in last month's Global View column, "One cannot dominate without size." But can one dominate without successfully managing the integration risk associated with M&As?

The technology landscape in particular is littered with the remains of unsuccessful integrations. According to a recent Grant Thornton study of 750 business owners and senior executives, the most common reason cited by 65% of all executives for a failed merger or acquisition is having a poor integration strategy. The real challenge for newly merged corporations is to combine the skill and expertise of each company in the new entity.

Information technology plays a critical role in determining how effectively the merged organization is able to integrate processes and people, and deliver products and services to internal and external customers. The absence of IT in the initial phases of an M&A facilitates unrealistic expectations for IT cost savings, speed and ease of integration, and maintenance of uninterrupted service. This month's cover story, "Taking a Byte out of M&A Failure," looks at how to manage the IT integration risk in a merger, and examines the role of the chief information officer (CIO) in forming an integration plan that analyzes the merger and forecasts its impact on business objectives and operational costs.

Of course, planning for the successful merger of two entities should begin even before you identify merger candidates or acquisition targets. Organizations should start with a thorough examination of the strategic assets that a company brings to the combination and a precise definition of the assets that the acquired company should contribute to meet the strategic goals driving the transaction. In "Kicking the Tires," author Howard Johnson, CMA, illustrates the different ways of determining the cost of capital in an acquisition target.

Companies considering joining forces with or acquiring another organization should create a clearly defined goal for the venture, set performance metrics that define its success, present a strategically sound vision for the combined entity, communicate the strategy to employees and customers, and take immediate steps to implement it. Otherwise, plan to become yet another statistic.

Kristin Doucet

Editor