Implications for practice

Figure 2 has three important implications for practice. First, it explains why many one-off acquisitions have a high probability of failure. Given the cost of and elapsed time to develop the three acquisition specific IT capabilities, their development could not be justified for a one-off acquisition. Therefore, in the absence of the required capabilities, such acquisitions are high risk and have a high failure rate. Regardless of previous acquisition experience, most organizations would have the capability to implement an absorption integration process. However, as the implementation challenge becomes increasingly complex, post-acquisition performance is contingent on the presence of high quality, experienced IT implementation capability.

Second, the causes of failure cannot be resolved in the short run, for example, after announcing an acquisition. The causes include the absence of selection and implementation capabilities, misalignment between business and IT strategies and a non-scalable IT platform. In this situation, the practical challenge becomes to identify and reduce risks. An important challenge for IT management is the management of the expectations of the IT organization’s limited ability to deliver post-acquisition IT integration.

Therefore, third, adopting a growth-by-acquisition strategy has a high failure rate in the short term. However, in the long term, once the prior conditions have been resolved, the strategy has a high probability of success. Beginning as an inexperienced acquirer without the required

acquisition specific IT capabilities and scalable infrastructure, the question is: Can the acquirer learn fast enough to satisfy the required sub-sets before failure discredits the strategy? Of

course, for those that do over time satisfy the sub-sets, successful serial acquisitions become normal. Not surprisingly, ‘successful’ serial acquirers undertake 60% of acquisitions.

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