Mergers and acquisitions

The communications equipment market has been long overdue for consolidation. Telecom equipment has been one of the longest suffering areas in IT. In their heyday, vendors like Alcatel, Lucent and Nortel dominated the market, establishing proprietary standards, making rules and setting the pace of change.

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By  Angela Sutherland Published  April 30, 2006

|~||~||~|The communications equipment market has been long overdue for consolidation. Telecom equipment has been one of the longest suffering areas in IT. In their heyday, vendors like Alcatel, Lucent and Nortel dominated the market, establishing proprietary standards, making rules and setting the pace of change. However, internet has changed all that, forcing telecom equipment makers to change their game. Although it has not been easy to adjust to the new environment, telecom equipment makers have taken steps to develop products designed to move internet traffic. Now they are joining forces to become efficient. For example, a merger between Alcatel and Lucent Technologies will create a global telecommunications equipment powerhouse. This merger is the beginning of further consolidation among networking and telecommunication equipment vendors. Mergers and acquisitions (M&As) are favored vehicles for global expansion, however, they are also among the most risky. Enterprises looking at consolidation should think it through. It is no secret that a lot of mergers don't work. Those who advocate mergers will argue the move will cut costs or boost revenues. In theory, 1+1 = 3 sounds great, but in practice, things can go terribly wrong. Historical trends show two thirds of big mergers will disappoint on their own terms, which means they will lose value on the stock market. In many cases, the problems associated with trying to make merged companies work are all too concrete. Coping with a merger can make CEOs and CIOs spread their time too thinly and neglect their core business. In addition, the chances for success are further hampered if the corporate cultures of the parties concerned are different. When an enterprise is acquired, the decision is typically based on product or market synergies, but cultural differences are often ignored. It is critical for executives of the merged entity to address these issues. Comprehensive due diligence and risk advisory services play a critical role for technology organisations involved in mergers or acquisitions. Due diligence uncovers the hidden details that will help avoid risk, create opportunity and strengthen negotiating position. Risk advisory provides a thorough examination of the transaction and isolates potential problems that may stall or even terminate a deal. M&As can not work without the effective integration of IT systems and networks. IT should play a fundamental role before, during, and after all M&As. Technology-enabled tools can help executives evaluate M&A opportunities, a CIO’s input can enhance due diligence, and IT can help merged entities solve critical issues. ||**||

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