Merger mania founders on lack of strategy

Technology companies, particularly in the telecoms sector, are keener than ever on mergers and acquisitions, but few follow up with clear integration strategies. This is the conclusion of a new report from consulting company Arthur Andersen.

It claims that companies view mergers as a way of achieving economies of scale through larger size, and such deals are on the increase.

However, it says many companies enter into such deals without proper consideration over how to integrate the two organisations and deliver a combined business strategy.

The report follows in the wake of examples such as AT&T and WorldCom which have been struggling after large acquisitions.

The report says that many of those companies interviewed said "they could not continue to grow their businesses without maintaining, or increasing, the extent of merger and acquisition activity".

The main benefits in such deals are seen as economies of scale, business growth, increased global presence and technology acquisition, with 98 per cent of tech companies asked saying that acquisition of talent was also important.

Of the executives surveyed, 76 per cent said they wanted to increase merger and acquisition activity. But 63 per cent said that a recently concluded deal had led to problems, from management difficulties to a drop in share price.

Sixty-five percent admitted they didn't have a strategy to follow up such a deal after it was planned, and three-quarters admitted they didn't have an integration plan.