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The real synergy killer in M&A: digital underinvestment

Carve-outs Integration
IT Transformations
Mergers and acquisitions (M&A) aim to deliver scale, speed, and synergy, but 40% to 90% of deals fail to achieve their goals, often due to ineffective digital integration (Harvard Business Review, 2011; IMAA, 2002). Merging IT systems, data, and processes is complex, and a narrow focus on minimizing integration costs ("cost-to-achieve") risks underinvestment in critical areas like security, compliance, and transformation readiness.

Instead, selecting an integration strategy that emphasizes long-term value over short-term costs and savings reduces risks, transforms digital integration into a strategic asset, and aligns IT with business goals for lasting success.
06 May 2025 minute read

Key takeaways about this insights

  • 40% to 90% of M&A deals fail to deliver expected value, often due to poor digital integration
  • Digital integration involving IT systems, data, and processes, is complex, with additional challenges like cost overruns and cultural misalignment
  • Focusing solely on costs-to-achieve and short-term cost savings may lead to underinvestment, risking long-term success and impact license to operate
  • Adopting an integration strategy that includes long-term value, security, compliance, and transformation readiness ensures enhanced digital integration outcomes for your M&A success

    Investing in digital integration: the key to unlocking long-term M&A value

    Mergers and acquisitions (M&A) promise significant benefits like scale, speed, and synergy, but delivering on these promises is far from guaranteed. Between 40% and 90% of M&A deals fail to achieve their intended business value, with failure rates varying by study and criteria (The New M&A Playbook - Harvard Business Review, 2011) (From Pre-Deal To All Systems Go - IMAA, 2002). A primary reason for this shortfall is poor digital integration as a result of the complex task of merging IT systems, data, and processes. As organizations increasingly rely on digital technologies, seamless integration becomes a critical factor of M&A success.


    The complexity of digital integration


    Digital integration after a merger or acquisition is a key challenge in the post-merger process. Research shows integrating IT systems and processes as one of the most difficult aspects of M&A: 68% of over two hundred senior executives involved in M&A responded finding it challenging and only 50% achieving full integration (2023 M&A Integration Survey - PwC, 2023).

    • Technical challenges: Merging disparate IT systems, harmonizing data schemas, and ensuring cybersecurity require meticulous planning. Initial cost estimates for systems integration can be overrun by 20% to 50% (Systems Integration - Bain, 2023). Unaddressed challenges lead to long-term technical debt and inflated IT costs.

    • Cultural and operational misalignment: Integrating IT cultures and reorganizing personnel are significant hurdles. Lack of cultural fit is a common reason for integration failures, impacting both cost and revenue synergies (M&A Annual Report 2025 - McKinsey, 2025).

    • Regulatory and timing pressures: Persistent closing timelines and regulatory inquiries can complicate integration efforts, particularly in regulated industries (2024 M&A Report - BCG, 2024).

    • Lack of early IT involvement: Nearly three-quarters of executives fail to recognize the importance of IT integration early in the deal-making process, leading to unrecognized challenges that surface post-merger (From Pre-Deal To All Systems Go - IMAA, 2002).

    These challenges underscore the high stakes of digital integration. Failure to address them can result in operational disruptions, financial losses, and missed opportunities for value creation, undermining the strategic intent of the M&A deal.

    A thought experiment on infrastructure integration as practical example


    Focusing on low migration costs and quick cost savings in digital integration is tempting but risky. The example below outlines why this is the case.

    Most often, organizations choose between three integration scenarios for their infrastructure integration:

    1. Migrating left, to low-cost infrastructure, may come at lower migration costs and deliver quick operational cost-savings
    2. Migrating right, to a modern infrastructure, may come at higher migration costs and will not deliver the same synergies as migrating left
    3. Creating a hybrid structure blending both infrastructures, balancing cost, and functionality, and in some cases achieved at lower costs than migrating left or right


    In this scenario, the choice for scenario 1 seems to be the most logical one.

    However, if we consider the value other than costs and synergies:

    1. A cost-friendly but less mature infrastructure could face higher maintenance, more frequent outages, and potential compliance risks in the near future
    2. A more expensive but modern infrastructure can offer better compliance, easy maintenance, user-friendliness, and minimal outages, ensuring scalability and long-term savings
    3. A hybrid system, while integration is cost-effective, often becomes complex and costly to maintain.

    By prioritizing a modern infrastructure, organizations can reduce rework, enable seamless transformations, and achieve the full potential of the M&A deal over time.

    Do’s and don’ts for effective digital integration


    Do's

    • Involve IT leadership already the pre-deal stage to anticipate challenges
    • Conduct comprehensive IT due diligence, not only focusing on the IT costs
    • Prioritize value creation long-term over short-term cost savings in architecture design
    • Allocate dedicated expertise for execution to create a license to operate
    • Empower internal teams through training and governance to ensure adoption
    • Leverage advanced digital tools like generative AI to enhance efficiency

    Don’ts

    • Underestimate the complexity of digital integration or delay planning
    • Determine integration strategy solely on costs, savings, and time
    • Retain outdated systems that hinder scalability and innovation
    • Neglect cultural integration (of IT teams), which can derail synergies
    • Overlook post-integration governance, risking compliance and performance issues

    Harvard Business Review, 2011

    "Mergers and acquisitions (M&A) aim to deliver scale, speed, and synergy, but 40% to 90% of deals fail to achieve their goals, often due to ineffective digital integration "

    A structured approach to digital integration

    To successfully navigate the complexities of a post-merger digital integration, a structured approach is essential, seamlessly aligning IT execution with strategic business objectives to drive value and ensure long-term success.

    1. Strategy & alignment
    • Objective: Establish a clear understanding of the M&A’s strategic goals, align business and IT leadership
    • Key Actions: Involve IT leaders early to identify potential challenges, conduct thorough due diligence, and develop a cohesive integration strategy. Early IT involvement is critical to recognizing technological integration difficulties (From Pre-Deal To All Systems Go - IMAA, 2002)
    • Do’s: Define clear success metrics, engage cross-functional teams, and align on value drivers, make a transactional service agreement
    • Don’ts: Delay IT involvement or assume integration challenges will resolve post-deal, implement target operating model before IT is ready to facilitate

    2. Architecture & planning
    • Objective: Design a robust digital architecture that supports the merged entity’s goals, and creating integration plan
    • Key Actions: Evaluate and select technologies, ensure scalability, and address compliance requirements. This includes assessing hybrid cloud environments, optimizing network topologies for seamless connectivity, and engineering resilient infrastructure to support high-availability systems. Technology drives approximately 10% of synergies and supports up to 85% of business synergies (Technology’s Role in PMI - BCG, 2024). Create comprehensive integration plan
    • Do’s: Prioritizing value over cost savings, start with integrating digital identities and collaboration platform to enable teams to work on integration, focus on modularity for flexibility, assess cloud landing zones, and ensure infrastructure resilience
    • Don’ts: Opt for quick fixes or retain outdated systems that hinder scalability
    3. Execution & migration
    • Objective: Establish license to operate and implement the integration plan with minimal disruption to business operations
    • Key Actions: Deploy dedicated resources, leverage expertise for system and data migrations, and use advanced digital tools for efficiency. This involves executing complex infrastructure migrations, such as data center consolidations or workload rehosting to cloud platforms, and automating user provisioning with Identity and Access Management (IAM) ecosystem to ensure secure and efficient transitions
    • Do’s: Allocate sufficient resources with required expertise, establish joint leadership, monitor progress closely, and prioritize high-impact migrations
    • Don’ts: Underestimate resource needs or prioritize low-impact projects like email mergers

    4. Adoption & governance
    • Objective: Ensure effective adoption of integrated systems and sustain long-term performance
    • Key Actions: Provide training, implement change management, and establish governance frameworks to monitor compliance and performance. Successful M&A organizations achieve a 57% higher completion rate in systems integration through robust governance (2023 M&A Integration Survey - PwC, 2023)
    • Do’s: Empower internal teams, foster a data-driven culture, and conduct regular audits
    • Don’ts: Neglect user training or overlook compliance requirements

    This model emphasizes modularity for adaptability, compliance to mitigate risks, and empowerment of internal teams to drive ownership and accountability. By following this approach, organizations can transform digital integration into a strategic asset, enabling them to achieve the full potential of their M&A deals.

    Conclusion: A value-driven digital integration strategy unlocks the full potential of M&A deals


    In today’s digital society, effective digital integration is not merely a technical necessity but a strategic enabler that determines the success of M&A deals. By adopting a structured, value-driven strategy to digital integration, organizations can unlock the full potential of their acquisitions, driving innovation, efficiency, and growth.
    Given the high stakes and complexities involved, partnering with experts who specialize in digital integrations is crucial. YaWorks stands ready to support your organization, combining strategic insight with technical execution to deliver the promised value of M&A deals.

    References

    • Harvard Business Review: The Big Idea: The New M&A Playbook
    • From Pre-Deal To All Systems Go: Eight Practical IT Integration Imperatives To Help Drive M&A Success – Institute for Mergers, Acquisitions & Alliances, 2002, authored by Richard A. Chang, Gary A. Curtis, Justin Jenk (Accenture)
    • BCG: Ten Lessons from 20 Years of BCG’s M&A Report
    • 2023 M&A Integration Survey
    • Bain & Company: M&A Report
    • McKinsey & Company: M&A Annual Report


    Harry Boersen Director Management Consulting