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Mergers, Acquisitions and data shock

  • 22/07/2011
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  • Posted by EuroSTAR

download (1)The news that Tom Alexander is stepping down as chief executive of Everything Everywhere (the name of the company that was formed after the merger of Orange and T-Mobile) throws into question accepted wisdoms about the virtues of Mergers & Acquisitions.

The reality is that a merger is no guarantee of healthy returns. Bigger does not necessarily mean better share value, and over 40% of mergers are not considered a success when measured against original investment objectives.

So why, when so much effort is committed to acquiring organisations that represent a ‘good fit’ do so many disappoint?

One report, “The good, the bad and the ugly: A guide to M and A in distressed times”, studied a global sample of 12,339 deals and questioned if snapping up companies in distress, ‘buying cheap’, gains the buyer a long-term advantage. The report was blunt, stating: ‘Integration strategies as well as execution planning emerge as even more important factors for deal success.’

Talk to those working on the inside of an organisation post-merger and they reveal that the pressure brought to bear on internal business systems is often intolerable. Take just one aspect – how to train hundreds of new employees from the old organisation, working with unfamiliar systems. Setting up databases to train the new intake sounds undemanding but large organisations working with production databases of 800 gigabytes or more know that creating test databases using full size copies of production data proves time consuming, disruptive and not to mention the massive risks it poses to data security.

Copying live production databases is commonplace in these circumstances but in order to comply with legal regulations the data needs to be masked before it can be exposed to non production environments. Using manual masking techniques to generate test data; de-identifying personally identifiable information, brings its own torrent of headaches. Again, sourcing information such as names, addresses and bank account details sounds straightforward, and might be, if they were stored in one place, yet in reality, they are stored over several hundred tables, and they all need to be masked before they can be exposed to a non production environment.

One might think that a tool that can mask referentially intact data quickly, or even create it from scratch, could be a useful tactical fix; it saves lots of time and ensures compliance. In reality, the long-term future viability and share value of companies depends on how well a business is integrated by the buyer, and as the corporate world has not lost faith in mergers and acquisitions as a route to secure growth, test data management is part of a necessary strategic framework that will underpin success.

Without this ‘C level’ understanding, data systems, the engine room of business, will misfire and it will be lawyers, not shareholders, who will reap the gains from mergers and acquisitions.

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