Disintegration: The Counter-intuitive Approach

Disintegration: The Counter-intuitive Approach

So much of the traditional M&A post-deal narrative is focused on combining, sharing and integrating to achieve the target synergies. However, in three of my most significant M&A experiences over the past decade, I have found the opposite to be the case, hence my belief in the importance of “disintegration”.

In a traditional post-merger integration scenario, the IT integration team is tasked with reviewing the business application and IT infrastructure landscapes, and defining a plan to combine and consolidate systems to simplify the environment and deliver “synergies” (essentially cost savings through economies of scale and skill).

However, sometimes the target business model of the merged entity is a less centralised, more devolved structure, with greater autonomy and empowerment for regions, countries or individual operating sites. In such a scenario, the IT integration team members find themselves in the challenging situation of having to deliver synergies while dismantling and devolving formerly shared systems and IT support teams (i.e. deliver cost savings through diseconomies of scale and skill!)

In a recent merger between a tier-1 mining organisation and a global trading house, the miner’s global, commodity-based operating model was to be transitioned to a more regional structure, with one of the newly formed divisions looking to dismantle a legacy mining head office. The IT integration team was tasked with determining which of the centralised systems should be retained, then devolving support appropriately.

Counterintuitively, the IT “disintegration” activities delivered significant and sustainable opex reduction by aligning the IT services appropriately with the target business requirements. Some practical examples of IT “disintegration” included: eliminating a centralised IT team, suspending a centrally driven business intelligence project, retiring a centrally hosted financial consolidation system, and cancelling a high-cost, 3rd-party IT support agreement and delivering the same service with fewer, in-house IT personnel.

My lesson learned is simple one: “synergies” come in many shapes and sizes, and they are not always achieved through combining, sharing or integrating. Sometimes a counter-intuitive “disintegration” approach can better align service levels with the target operating model, delivering significant value in the process.