Managing IT Integration Risk in

Acquisitions
This article presents a framework for assessing IT integration risk in acquisitions.
Using the experience of Trelleborg AB, a serial acquirer, we illustrate the framework’s
merits for managing high-risk acquisitions and identifying low-risk acquisitions.
Based on insights gained from Trelleborg, we provide recommendations for CIOs on
assessing and managing IT-related risk in acquisitions.1,2

Stefan Henningsson William J. Kettinger

Copenhagen Business School (Denmark) University of Memphis (U.S.)

Importance of Managing IT Integration Risks in

Acquisitions 1 2

Acquisitions of companies and business units have become important components of

corporate growth strategies. Appropriately executed, acquisitions enable growth in scale or
scope, create opportunities for future business and give access to important resources. In 2014,
there were over 40,400 mergers and acquisitions worldwide, with a total value of $3.5 trillion.3
IT integration (integration of hardware, software, data and related business processes) is
the second most frequent reason for acquisition failure.4 Accenture and McKinsey reported
that 45%-60% of the expected benefits from acquisitions depend directly on effective IT
integration.5 The combined organization cannot function effectively and leverage business
synergies until the IT of the acquired business unit is integrated with the acquirer’s existing IT.6
In addition, companies with stronger IT integration capabilities are more successful in creating
value from acquisitions than their peers.7 For the CIOs of acquiring companies, IT integration
presents a critical management challenge.

1  Dorothy Leidner is the accepting senior editor for this article.

2  We would like to thank Trelleborg AB, in particular Jan T. Pettersson and Alain Guillon, for their generous contribution to this re-
search. Individuals at Trelleborg contributed rich information about the actions and events in Trelleborg’s acquisitions. We also thank
Lund Institute of Economic Research, which made this research possible through the learning partnership with Trelleborg AB. Our
thanks also to the editors and reviewers of the Practice-based Research mini-track of the 2015 Hawaiian International Conference of
Systems Science for their insightful input on an earlier version of this article.
3  Mergers & Acquisitions Review Full Year 2014, Thomson Reuters, December 2014.
4  Curtis, G. A. and Chanmugam, R. “Reconcilable Differences: IT and Post-merger Integration,” Accenture Outlook 2005 (2), pp.
81-85.
5  Sarrazin, H. and West, A. “Understanding the strategic value of IT in M&A,” McKinsey Quarterly (12:1), 2011, pp. 1-6.
6  Yetton, P., Henningsson, S. and Bjorn-Andersen, N. “Ready to Acquire: The IT Resources Required for a Growth-by-Acquisition
Business Strategy,” MIS Quarterly Executive (12:1), 2013, pp. 19-35.
7  Tanriverdi, H. and Uysal, V. B. “Cross-Business Information Technology Integration and Acquirer Value Creation in Corporate
Mergers and Acquisitions,” Information Systems Research (22:4), 2011.

March 2016 (15:1) | MIS Quarterly Executive 1

Managing IT Integration Risk in Acquisitions

Figure 1: Generic Acquisition Process and the Typical Involvement of the IT Function

Target Acquisition Contract Day

Identification Intention Signing One

Acquisition Target Due Contract Integration Trans-

Process Scanning Diligence Negotiation Planning formation

Ideal point of involving Typical point of involving

the IT function the IT function

However, although IT integration is essential outcomes of IT integration mismanagement are

to realize the business synergies that motivate an provided in the sections that follow).
acquisition, only 24% of companies include IT in To ensure the appropriate level of engagement
the due diligence before the acquisition.8 When a of the IT function and to avoid situations where IT
potential target emerges on the acquisition radar, becomes the reason the acquirer does not realize
the acquirer usually has only a short amount of the anticipated value, an acquiring organization
time to assess potential combination synergies must address two questions:
and threats to value creation to prepare a ●● What are the drivers of a high-risk
competitive bid. In this frenzy of activity, anything acquisition IT integration project?
not deemed to be a potential “deal breaker” may
be pushed aside to reduce complexity. Often, ●● How can the CIO manage these risk drivers
IT is not considered crucial to the deal and, as a to avoid a failed integration project?
consequence, the IT function is not involved until In this article, we answer these questions by
the firm is committed to put in an offer for the drawing on research on acquisition IT integration
target (see Figure 1). and on the experiences of Trelleborg AB, a
Delaying the involvement of the IT function Swedish-based industry group that between 1996
until contract negotiation or even as part of and 2011 made 77 acquisitions to develop into
integration planning can work well, and there a global business with 22,000 employees. (The
are many examples in the academic and business research that underpins this article is described
literature of acquirers that rapidly consolidate in the Appendix.) Through these acquisitions,
IT systems post-acquisition. But there are Trelleborg transformed from a diversified
also many examples where the challenge of conglomerate to an industrial group focused on
IT integration has been underestimated and polymer technologies.
subsequently mismanaged. In these cases, earlier For pragmatic reasons, including legal
IT involvement at the target identification stage limitations, time constraints in the acquisition
would have been beneficial. review process and uncertainty about which
There are distinctive differences in the degree deals eventually materialize, Trelleborg’s
of difficulty presented by various acquisition IT IT function frequently only got involved
integration projects, ranging from migrating a at the contract negotiation phase. Despite
minor set of data to the challenge of a complete this, Trelleborg learned to conduct an IT
IT redevelopment program. Some acquisition risk assessment that identified potential IT
IT integration challenges present substantially integration risks through a progressive risk
higher risk that can impede the realization of analysis process where senior business managers
acquisition benefits through overspending in assumed some responsibility for sensing IT
the integration process, destroy value or delay risk drivers when approaching an acquisition
benefits (details about the possible negative target. Identifying potentially risky IT integration
8  Curtis, G. A. and Chanmugam, R., op. cit., 2005. projects enabled Trelleborg to manage the risk

2 MIS Quarterly Executive | March 2016 (15:1) misqe.org | © 2016 University of Minnesota
 Managing IT Integration Risk in Acquisitions

drivers in high-risk acquisitions and to reap the Acquisition IT Integration Risk

advantages of identifying low-risk acquisitions
early on. This ability helped Trelleborg to stay Areas
focused on the acquisition assessment process Success or failure with IT integration following
and to involve the IT function early on in the an acquisition typically does not depend on
acquisition process only when IT integration was whether integration is achieved or not. Instead, it
critical to the acquisition outcome. is determined by how many resources and much
Over time, Trelleborg gained the reputation time are needed to complete the necessary IT
of being a skilled acquirer that frequently integration and how effective the consolidated
obtained important business benefits from its solution is. Thus, acquisition IT integration risk
acquisitions. Although some of its experience has to do with possible suboptimal outcomes
may be different from that of other companies, of an integration project that could negatively
Trelleborg’s approach to dealing with acquisition affect the acquisition outcome. There are three
IT risk provides a general framework for principle ways in which IT integration can
prospective acquirers to manage IT-related risk in impact acquisition outcome: overspending, value
acquisitions. destruction and benefit delay.10
In the following sections, we build on existing
research on acquisition IT integration to identify Risk of Overspending
three areas of IT risks (overspending, value The overspending risk means that IT
destruction and benefit delay) and four risk integration may be achieved, but at high cost.
drivers (integration extent, integration method, Overspending can arise from applying an
time pressure and integration novelty). Using incorrect IT integration strategy that has to be
the acquisition experiences of Trelleborg, we revised, from rebuilding resources where an
illustrate the effects of underestimating IT risk in existing resource could have been reused or
a high-risk acquisition, the value of managing IT from using expensive consultants for tasks that
risk in a high-risk acquisition and the advantages the acquirer’s own IT organization could have
of establishing early on that an acquisition is low handled. Overspending may, in the worst case,
risk in terms of IT integration. offset the business benefits of an acquisition.
We then combine Trelleborg’s acquisition IT
integration experiences with the three risk areas Risk of Value Destruction
and four risk drivers to develop an Acquisition IT This risk arises from replacing the target’s
Integration Risk Assessment Framework,9 which unique/critical IT in a way that may limit
can be used to assess IT integration risks and the value of the acquisition. The risk of value
identify strategies for mitigating them. We show destruction is primarily associated with the
how Trelleborg used the knowledge encapsulated method used to carry out the IT integration
in this framework to progressively gain an project. One common method is to partially or
understanding of IT risk levels in its acquisitions. fully replace the target’s IT systems with those of
Finally, we present the lessons distilled the acquirer. This is attractive because the target
from Trelleborg’s acquisition IT integration instantly becomes integrated with the acquirer.
projects. These lessons will help CIOs in other However, if the acquired unit derived substantial
organizations to establish their own acquisition competitive advantage from the retired IT
IT integration risk management practices. systems, this method for IT integration leads to
value destruction.

Risk of Benefit Delay

This risk arises from business synergies
being delayed because of a poorly orchestrated
9  This article focuses on the practical implications of Trelleborg’s IT integration process. Delays in evaluating
acquisition IT integration projects. For a theoretical analysis of
Trelleborg and its approach to post-acquisition IT integration, see 10  Mehta, M. and Hirschheim, R. “Strategic Alignment in Mergers
Henningsson, S. and Carlsson, S. A. “The DySIIM model for manag- & Acquisitions: Theorizing IS Integration Decision Making,” Journal
ing IS integration in mergers and acquisitions,” Information Systems of the Association for Information Systems (8:3), 2007, pp. 143-174;
Journal (21:5), 2011, pp. 441-476. Henningsson, S. and Carlsson, S. A., op. cit., 2011.

March 2016 (15:1) | MIS Quarterly Executive 3

Managing IT Integration Risk in Acquisitions

Table 1: Acquisition IT Integration Risk Drivers

Risk Driver Components
Extent (what to integrate) ●● Process scope—number and extent of business
Amount of information and processes to be integrated
business processes needing IT ●● Data intensity—amount and complexity of data
integration.
Method (how to integrate) ●● Business disruption—degree of disruption to valued
More disruptive and/or radical business processes
methods may be required. ●● New development—need for development of new IT
resources
Time pressure (source of pressure) ●● From inside—seller’s timeframe for supporting
Constrains what can be acquisition; internal pressure to achieve synergy.
accomplished in the short term. ●● From outside—investors demand for synergies.
Novelty (lack of know-how) ●● Business know-how—(internal and external) of project
Experience and/or access to planning and implementing integration processes
existing or outside knowledge. ●● IT know-how—(internal and external) of project
planning and implementing IT integration
IT integration options, gaining access to Three factors determine what needs to be
competencies, correcting mistakes or rebuilding integrated: (1) prospective business synergies,
critical IT resources lost in the transition lead to (2) future IT costs and (3) the acquired unit’s
the delayed realization of business benefits. dependence on unique IT. The concept of synergy
is essential for understanding the rational
Acquisition IT Integration Risk reasons why companies make acquisitions.
Drivers Synergy in this context is when two units can
be run more efficiently and/or more effectively
Acquisition IT integration risks have four together, rather than apart. The prospect of
common risk drivers identified in the literature synergies motivates an acquisition, and IT
and observed in the Trelleborg cases: integration should therefore be integrated to the extent that
extent, integration method, time pressure and is necessary to enable synergies to be realized.
integration novelty (See Table 1). Thus, if the acquisition is expected to bring
synergies in sales, IT support for sales needs to
Integration Extent Risk Driver be integrated. However, if the expected synergies
IT integration extent refers to what needs to be
do not depend on IT integration (for example,
integrated with IT in an acquisition. If the scope of
an acquisition of an innovative startup that is to
business processes to be integrated is large (high
be retained as a separate unit while it matures),
extent), there will be more risk than if there are
the risk arising from the integration extent driver
few business processes to integrate (low extent).
drops toward zero.
Good documentation of business processes
In addition to IT integration to enable the
further reduces risk. Also, the data intensity of
expected synergies of an acquisition, there
the processes to be integrated contributes to
might also be IT cost reasons for replacing the
the extent of the challenge; high intensity means
target’s IT systems with those of the acquirer.
more data needs to be transferred.11
Replacement will reduce future maintenance
because only one system will have to be
maintained instead of two. However, cost-based
11  Massetti, B. and Zmud, R. W. “Measuring the Extent of EDI Us- replacement should be considered only if it does
age in Complex Organizations: Strategies and Illustrative Examples,”
MIS Quarterly (20:3), 1996, pp. 331-345; Henningsson, S. and Carls-
son, S. A., op. cit., 2011.

4 MIS Quarterly Executive | March 2016 (15:1) misqe.org | © 2016 University of Minnesota
 Managing IT Integration Risk in Acquisitions

not destroy any competitive advantage that leave existing business processes undisturbed are
depended on the target’s systems. less complex and therefore less risky.
The five commonly used methods are rip
Integration Method Risk Driver and replace, bolt-on, sculpt, combine and start-
Several potential methods can be used over, each of which comes with specific business
to integrate the target’s IT with that of the implications and tradeoffs (see Table 2).
acquirer. Different methods have varying levels Each integration method might involve
of complexity, and higher degrees of complexity tradeoffs. For example, to facilitate the speed of
mean more uncertainty, equating to greater risk. integration, the acquirer might choose the rip and
Methods that preserve existing IT systems and replace method, even though it erases some good

Table 2: Complexity and Business Consequences of IT Integration Methods

Method Description Complexity Business Impact/Tradeoffs
Rip and The target’s IT systems are retired and Lowest ●● Destroys IT-related capabilities in
Replace replaced by the acquirer’s existing the target
systems. Data from the target’s systems ●● Disrupts target’s business
is converted and transferred to the processes
acquirer’s systems.
●● Introduces acquirer’s business
practices in target
Bolt-on Retains some of the target’s systems, Low ●● Potential scale-based synergies
but the target is largely supported by the are not realized
acquirer’s systems. This leads to partial ●● Add-ons may over time cause
standardization, with some common IT the IT infrastructure to become
shared between the acquirer and target. complex
The remaining systems are bolted on to
the acquirer’s IT platform.
Sculpt Most of the target’s IT is replaced by Medium ●● Destroys IT-related capabilities in
the acquirer’s IT, but specific systems the target
are carefully selected, carved out and ●● Applies only when the target
made the new standard in the merged can be fully supported by the
organization. This is the preferred method acquirer’s IT
if the target has superior IT-enabled
business processes. ●● Establishes best practice across
the merged organization
Combine A selective and potentially political High ●● Adds to infrastructure complexity,
process in which the acquirer’s and with corresponding high
target’s corresponding systems are maintenance costs and growth
evaluated. For each process, the best constraints
solution is picked and becomes the ●● Requires a political negotiation
standard in the combined organization. process
The different systems are bridged by
interfaces. ●● Establishes best practice across
the merged organization
Start- This method is necessary if neither the Highest ●● Requires substantial resources and
over acquirer’s nor the target’s IT supports the is uncertain
business of the combined organization. ●● Does not limit what can be done
New IT functionality has to be developed.
Doing this is frequently costly and
difficult, given the time pressure to realize
post-acquisition synergies.

March 2016 (15:1) | MIS Quarterly Executive 5

Managing IT Integration Risk in Acquisitions

IT-related capabilities in the target. Or, it might integration method introduces “worst practice”
be necessary to reduce the scope of integration into the previously superior business processes of
to not disrupt the target. There might also be the target. Moreover, the rip and replace method
situations when the acquirer has to embark on a may cause significant disruption in the target
complex integration project despite the high risk. if the operational practices of the acquirer and
The five integration methods range from low target are very different.
to high complexity. Complexity is determined Bolt-on Integration Method. The bolt-on
by the extent of new IT development (hardware, method is the second least complex of the five
software and related practices) required and integration methods, conforming essentially to
the degree to which a method may disrupt the same logic as the rip and replace method.
ongoing business and information processes But despite its low complexity, there is still a risk
(see Figure 2). Disruptions imply a temporary that the bolt-on method might destroy value by
drop in productivity related to the introduction replacing the target’s IT systems. The additional
of new IT resources, followed by an increase as challenge with this method is to identify the
the merged organization adapts to using the new target’s unique IT systems and integrate them
practices associated with the newly introduced IT. with the acquirer’s IT. If this is done correctly,
In this context, complexity should be understood it should be possible to avoid destroying value
as a subjective managerial judgment, based on within the target. The downside of the bolt-on
general factors including new development, method is that continually bolting on new IT
elements to be integrated (systems, applications, can, over time, create a highly heterogeneous IT
data, processes, etc.) and, most importantly, their infrastructure that is expensive to maintain.
mutual interdependencies. Sculpt Integration Method. The sculpt
Rip and Replace Integration Method. The rip method seeks to deal with the risk of introducing
and replace method is the least complex because “worst practice” by describing the acquirer’s
it allows use of what the acquirer already has to business processes to the target and asking
support the acquisition. Once the IT has been “Can you improve these processes?” If the
integrated, the acquisition will be complete, and answer is “yes,” the target’s IT that supports the
the combined organization can immediately specific processes is identified and assessed so
start benefiting from the business synergies the relevant IT functionality can be rebuilt (or
that motivated the acquisition. However, the carved out) in the acquirer’s IT. The advantage
condition for being able to employ a full rip and of the sculpt integration method is that it results
replace method is that all the business processes in a homogenous IT infrastructure instead of a
of the target can be supported by the acquiring patchwork. The limitation is that this method
organization’s existing IT. The risk is that this is suitable only when the target displays best

Figure 2: Integration Complexity as a Function of Integration Extent and Integration

Method
High

Integration
Extent

Low Rip and Bolt-on Sculpt Combine Start-over High

Replace
Method Complexity

6 MIS Quarterly Executive | March 2016 (15:1) misqe.org | © 2016 University of Minnesota
 Managing IT Integration Risk in Acquisitions

Figure 3: Comparison of the Five Integration Methods

Rip and Replace Bolt-on
Acquirer IT Acquirer IT

Combined IT Combined IT
IT Match IT Match

Target IT Target IT

Sculpt Combine
Acquirer IT Acquirer IT

Combined IT Combined IT
IT Match IT Match

Target IT Target IT

Start-over
Acquirer IT

New IT
IT Match

Target IT

practice in a limited number of processes, development projects are both expensive and
otherwise the amount of carving out will require uncertain, and therefore high risk.
substantial resources. Moreover, there has to be a The essential differences between the five
full match between the acquirer’s and the target’s acquisition IT integration methods are depicted in
IT; if this is not the case, the sculpt integration Figure 3.
method has to be combined with the bolt-on
method. Time Pressure Risk Driver
Combine Integration Method. The combine The time pressure risk driver influences
method is relatively easy to carry out when the the integration timeframe of acquisition IT
combination can be made by carving out specific integration. Because completed IT integration is
IT from the target to replace the acquirer’s a prerequisite for realizing most of the synergies
corresponding IT. However, this method from an acquisition, IT management typically
becomes complicated when dealing with a experiences a high level of internal pressure to
combination of equals. As well as often becoming complete the integration as soon as possible.12
a highly political process, the result is a complex However, if the acquired unit is divested from
patchwork of interdependent IT that originally a business with multiple units, there is also
was not designed to work together. external time pressure from the seller and
Start-over Integration Method. The start from the diffuse “market.”13 Typically, there is
over method completely redevelops IT systems pressure to quickly integrate basic infrastructural
to support the combined organization. A more services such as email, intranet and phones,
moderate, but still complex, challenge would
be the redevelopment of the IT systems to 12  Johnston, K. D. and Yetton, P. W. “Integrating information
technology divisions in a bank merger: Fit, compatibility and models
support a specific business unit within a larger of change,” The Journal of Strategic Information Systems (5:3), pp.
organization. History shows that large-scale IT 189-211.
13  Mehta, M. and Hirschheim, R., op. cit., 2007.

March 2016 (15:1) | MIS Quarterly Executive 7

Managing IT Integration Risk in Acquisitions

all of which need to be available immediately existing or outside knowledge to address the
after the acquisition. However, most acquirers IT integration challenge. To be successful, two
have the capabilities to quickly integrate such tasks need to be accomplished: the design of
infrastructural services. The critical question is the IT integration and the implementation of
what time pressure is there to integrate IT that the designed IT integration.16 Designing the IT
enables business synergies from the acquisition. integration includes determining the extent of
Everything else being equal, fast IT integration integration required, the integration method
enables the synergies that motivated the required to realize potential business benefits
acquisition and has a positive financial impact. and the timeframe of the project. Implementation
However, there is at least one very good reason requires different competencies, depending
why an acquirer might want to postpone an on the extent of the integration and the
acquisition IT integration project. If a substantial method chosen. Different technical skills and
IT platform upgrade is on the horizon, the IT understanding of existing IT systems are required
integration could be included in that platform for redeploying IT systems than those required
change. IT integration projects are frequently for carving out systems or developing new
very expensive, sometimes costing hundreds of systems.
millions of dollars. It makes sense for an acquirer There are two main sources of the knowledge
that will soon be moving to a new platform to and skills needed to address an acquisition
avoid having that expense twice. IT integration challenge: (1) from within
In minor acquisitions, the acquired unit is the acquirer’s own organization and (2)
frequently divested from another large firm. This external sources, such as consultants. Serial
type of acquisition increases the need for rapid acquirers (such as Trelleborg) tend to get
IT integration because the divesting firm will better at acquisition IT integration over time
likely be unwilling to support the transferred through learning. Formal learning takes the
business. Typically, unless the critical IT systems form of guidelines, checklists, methods and
are specified in the contract, the seller will be documentation from previous acquisitions.
unwilling to devote resources to supporting the Informal learning occurs through practice
systems after the transfer contract has expired. development, the personal experience of people
Thus, standalone businesses are less risky involved in integration projects, organizational
acquisition targets because they present no structures and the reuse of the acquirer’s own IT
natural deadline for the IT integration project.14 setup. Frequent acquirers can build two types of
Stock market investors also influence knowledge.17 For the implementation task, it is
decisions by public companies on the timing of possible to build organizational routines for the
acquisition IT integration. Investors expect the most common implementation challenges, such
promised synergies to be realized within a short as a rip and replace method to integrate a minor
timeframe after the acquisition deal,15 which acquisition target. In addition, frequent acquirers
creates a high level of time pressure to finalize can build expertise that enables them to select
IT integration and can lead to “quick fixes” that the right method and to adapt existing routines to
are suboptimal in the long run. However, if the match unique features of a particular acquisition.
acquirer knows that some synergies will not be In addition to in-house integration
realized until the next IT platform update, it can competencies, consultants provide another
exclude these benefits from the material provided source of knowledge and skills.18 For novice
to investors when the acquisition is announced. acquirers, consultants can provide the expertise
needed for planning and managing the entire
Integration Novelty Risk Driver
The integration novelty risk driver refers 16  Yetton, P., Henningsson, S. and Bjorn-Andersen, N., op. cit.,
to the acquirer’s experience and/or access to 2013.
17  Henningsson, S., “Learning to acquire: how serial acquirers
14  Böhm, M., Henningsson, S., Leimeister, J. M., Yetton, P. and build organisational knowledge for information systems integration,”
Krcmar, H. “A Dual View on IT Challenges in Corporate Acquisi- European Journal of Information Systems (24:2), 2015, pp. 121-144.
tions and Divestments,” International Conference on Information 18  Henningsson, S. and Øhrgaard, C. “Acquisition IT Integration:
Systems, Shanghai, China, 2011. The Roles of Temporary Agency Workers,” paper presented at Euro-
15  Mehta, M. and Hirschheim, R., op. cit., 2007. pean Conference on Information Systems, 2015.

8 MIS Quarterly Executive | March 2016 (15:1) misqe.org | © 2016 University of Minnesota
 Managing IT Integration Risk in Acquisitions

acquisition IT integration project. Good During its acquisition program, Trelleborg

consultants possess experience accumulated faced a wide variety of IT integration challenges,
across many acquisitions by a range of different addressed by an equally divergent set of
acquirers. However, more frequent acquirers solutions. These solutions ranged from small
tend to rely less on external sources of expertise. rip and replace integrations done in months to a
By letting their own personnel plan and lead complete rebuilding of business units’ IT systems
acquisitions, the learning experiences stay within that took years to implement. Accumulating
the organization and can be used for future experiences across these acquisitions, Trelleborg
acquisitions. developed a set of IT integration routines
that could be enacted when appropriate, as
How Trelleborg Managed well as more general IT integration expertise
Acquisition IT Integration Risk that enabled the company to choose the most
appropriate IT integration method. As part of
Trelleborg AB has grown to a global this general expertise, Trelleborg also developed
industry group with businesses based on a process for assessing and managing acquisition
processed polymer materials. In the mid-1990s, IT integration risk.20 This process involves
Trelleborg launched a corporate strategy termed interplay between senior business managers
“concentration and expansion.” At that time, and IT managers as the prospective acquisition
the company was a diversified organization targets are investigated along the dimensions of
concentrated in the Nordic countries. IT integration extent, integration method, time
Divestment of non-core operations had put it in pressure and integration novelty.
a strong financial position, enabling it to focus Below, we present three of Trelleborg’s
on growth in businesses with advanced polymer acquisitions (see Table 3). We have selected these
technologies. The target for average growth cases from Trelleborg’s 77 acquisitions because
in this area was 8%-10% annually over an they clearly illustrate how acquisition IT risk
economic cycle. Between 1996 and 2011, organic drivers can be identified and managed (or not
growth was supplemented by 77 acquisitions managed):
of complementary operations. In 2011, the
group was structured in four divisions (Sealing ●● The Kléber acquisition illustrates
Solutions, Wheel Systems, Engineered Systems the effects of underestimating the IT
and Automotive) and had 22,000 employees in 44 integration challenge in a high-risk
countries. Sales rose to €3.4 billion ($3.65 billion) acquisition.
in 2011, generating a profit (EBIT) of €280
million ($301million).19

Table 3: Key Data for the Three Acquisitions

Year Year Acquisition Target Target’s No.
Target Seller Business
Acquired Integrated Price (€m) Sales (€m) of Employees
Kléber 1996 2006 40 Michelin Industrial 60 750
(FR) hose
Dynaflex 2004 2004 15 Manuli Specialty 15 50
(IT) hose
CRP 2006 2009 100 Barclays Offshore 100 500
Group (U.K.) equipment

20  For an extensive analysis of how Trelleborg learned to manage

19  Euro/dollar conversion rate as of January 2016. acquisitions, see Henningsson, S., op. cit., 2015.

March 2016 (15:1) | MIS Quarterly Executive 9

Managing IT Integration Risk in Acquisitions

●● The CRP acquisition illustrates how a high- short timeframe of the due diligence phase and
risk acquisition can be managed if the IT time pressure from the contract negotiations,
risk is identified early on. little thought was given to IT integration.
●● The Dynaflex acquisition illustrates However, the limited attention given to the risk
the advantage of establishing that an assessment of acquisition IT integration created
acquisition is lower risk. barriers to realizing the business value of the
Kléber acquisition. Pre-acquisition, Trelleborg’s
hose business was supported by an IT platform
Kléber Acquisition: Effects of
based on a highly customized implementation of
Underestimating IT Integration the Movex enterprise resource planning (ERP)
Challenge system, and that platform was well aligned with
Early in its acquisition experience, Trelleborg Trelleborg’s niche-based business strategy. Using
acquired Kléber to build a scale-based business the rip and replace method, Trelleborg decided
in the hose industry. Trelleborg’s hose business to move Kléber’s systems onto the Movex-based
had been struggling for some time, and it was platform. However, with the arrival of a new
uncertain if it would be part of the redefined management team, this integration project was
core business. The situation in Kléber was cancelled in 1998.
similar, where the current owner had avoided
long-term investments while trying to sell the “If you look [at the requirement specification
business. Several prospective buyers before for the system], it is a detailed description
Trelleborg declined acquiring Kléber. Because of of what everyone was doing already. The
this, Trelleborg managed to negotiate a favorable people providing input for this had never
financial deal and acquired Kléber from Michelin worked with the system themselves; the
France in 1996. only thing they knew was that they wanted
Kléber was four times larger than Trelleborg’s exactly the same as they already had. … The
own hose business units. By combining the only idea was to have the same as before.”
resources of its own units with those of Kléber, Operations Manager, Trelleborg Industrial
Trelleborg aimed to reposition its hose business Hose
as having a low-cost, scale-based strategy.
By combining Kléber with the existing hose The new operations manager of the hose
businesses in the new Trelleborg Industrial Hose business assessed the progress of the integration
unit, Trelleborg expected economies of scale to be project and saw that the Movex platform was
achieved in production, sales and distribution. customized to meet the requirements of the
old hose business’s niche strategy. It was not
“In terms of production, the two units designed to support the desired scale-based
... were very compatible … Overlapping operations of the combined unit. Also, with
was also limited in geographical terms. the new millennium approaching, Trelleborg
Trelleborg was more Nordic, more niche. faced another challenge in that Kléber’s existing
Kléber was more continental, had a larger Bergounix ERP system was not expected to be
product range and had a wider distribution Y2K compatible. Despite the external and internal
network.” Sales Manager, Trelleborg pressure to realize the promised benefits of the
Industrial Hose acquisition, the operations manager understood
that fundamental IT change now required using
While the due diligence team recognized the the start-over integration method to ensure the
potential for extensive IT integration, because acquisition’s benefits were realized.
Kléber’s IT platform was completely standalone
and fully operational, the team did not identify “After two years, they came to the conclusion
an immediate need for an IT integration project. that it would take about 1,000 working
With limited IT risk assessment conducted by days to develop the new Movex system to
business managers on the due diligence team, support the Kléber integration … It couldn’t
IT integration was not seen as a major threat to be justified by future savings.” Operations
realizing value from the acquisition. With the Manager, Trelleborg Industrial Hose

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 Managing IT Integration Risk in Acquisitions

Given the inability to immediately achieve years when management recognized the risk of
integration benefits, the new management team continuing with this approach and wrote off the
decided to restructure the combined unit to costs incurred to date. Needless to say, Trelleborg
capture scale advantages. Production was moved shareholders were not impressed by the total
to the former Kléber site, providing production- of 10 years until the business benefits of the
based economies of scale. Single functional acquisition were fully realized. Luckily, Trelleborg
heads were appointed in a centralized cost- learned from this experience, as illustrated below
focused structure. To gain time and quickly start when it faced a similar IT integration challenge in
reaping minor benefits, Kléber’s Bergounix-based the acquisition of CRP.
platform was initially retained, using a temporary
bolt-on IT integration method. CRP Acquisition: Managing a High-Risk
Over time, the Bergounix platform, which was Acquisition
expensive to maintain and extend, was replaced Trelleborg completed the acquisition of CRP
by a central, standard Movex system. in 2006 from a private equity fund headed by
Barclays in the U.K. CRP had five U.K.- and U.S.-
“[It took almost two years] because they based production units. The company was active
would say that it was impossible to invoice in systems for seismic surveys, drilling operations
an Italian, Spanish or German customer and subsea production, with solutions for
from France … I think it was a cultural issue deepwater flow assurance and buoyancy systems,
and an issue of wanting control over the as well as many specialized engineered polymer-
business.” Operations Manager, Trelleborg based solutions. Sales and marketing offices were
Industrial Hose located in important offshore areas. As a result of
the acquisition, Trelleborg’s oil- and gas-related
The old Trelleborg hose business was finally
operations were expected to grow to 7%-8% of
moved to the new Movex system in 2005 to
total group sales.
complete the start-over integration method. As a
CRP was a profitable business with operations
consequence, costs were reduced and Trelleborg
related primarily to hydraulic systems for the
Industrial Hose finally became profitable.
subsea sector of the oil and gas business.
“In 1999, three years after the acquisition,
“The CRP acquisition was a step into an
we lost €3 million. The ROA [return
attractive segment. We already had some
on assets] was negative, while for the
business within this segment, but with CRP
Trelleborg Group the standard was 15%. We
we at least tripled our presence in that
have improved every year since then, and
segment.” CFO, Trelleborg Engineered
last year we had a ROA of 17%.” Operations
Systems
Manager, Trelleborg Industrial Hose
During due diligence, Trelleborg recognized
“… we waited … until we had migrated all that its strong presence in northern Europe was
other units. When they said that it was complemented by CRP’s similar business in the
impossible, we could just point to what U.K. and U.S. CRP’s production facilities (and its
… proved that it worked.” Operations head office) were located in Skelmersdale and
Manager, Trelleborg hose business unit Barrow-in-Furness in the U.K., with additional
facilities in Randolph and Canton, Massachusetts,
It is possible that Trelleborg could never have and Houston, Texas, in the U.S. Trelleborg saw
completely avoided the IT integration problems the acquisition as a way of extending its market
encountered in the Kléber acquisition. The reach, with the two businesses providing
unrecognized preconditions of the acquisition similar products but in different markets. This
were that neither the pre-existing IT platform complementarity promised long-term potential
of the existing hose business nor Kléber’s IT economies of scale in production, scheduling and
platform could support the global, scale-based logistics. However, rather than moving quickly to
hose business. The initial rip and replace IT exploit the complementarities, Trelleborg decided
integration method was abandoned after two that, given their separate market geographies

March 2016 (15:1) | MIS Quarterly Executive 11

Managing IT Integration Risk in Acquisitions

and the need to rebuild neglected capabilities at that requires a high-risk IT start-over project.
CRP,21 the two businesses would initially be kept The acquisition of Dynaflex described below
separate. illustrates the advantage of IT integration risk
Although the start-over method was eventually management in a lower-risk acquisition.
used to integrate Kléber’s IT, the CRP integration
project began differently. This time, initial risk Dynaflex Acquisition: Benefits of
assessments were carried out, including detailed Identifying a Low-Risk Acquisition
judgments on integration extent and novelty. Recovering from the Kléber acquisition, in
These assessments led Trelleborg to understand 2004, Trelleborg made a second acquisition in
it needed to completely rebuild the IT systems the hose industry, acquiring the small niche-
supporting the merged business in hydraulic player Dynaflex from the Italian industry group
systems to fully realize the economies of scale. Manuli. Trelleborg and Dynaflex both had
The IT manager of the Engineered Systems hose production facilities in central France.
Division was responsible for the IT integration of However, their core customers and products
CRP. were independent of each other. Trelleborg
manufactured and serviced a wide range of
“I learned about the deal only weeks before hose products, while Dynaflex specialized in
it took place. This is how things go normally. the production of hydraulic hoses for the oil and
You cannot prepare for everything; you petrochemical industries, where it enjoyed a
discuss and plan for numerous deals reputation for technology leadership. Acquiring
simultaneously. … I don’t think anyone Dynaflex would provide Trelleborg with new
can foresee which deals will come about in production facilities that could benefit from
the end, so only when the deal is about to Trelleborg’s established distribution network.
happen will they involve me.” IT manager, The intention was to grow Dynaflex’s business
Trelleborg Engineered Systems by launching its products in markets where
Trelleborg had a strong position.
When announcing the CRP acquisition to
The acquisition of Dynaflex was, however,
the market, Trelleborg only stated the expected
complicated by another acquisition in the
synergies that were possible to realize without
hose business taking place at the same time.
full IT integration. This reduced the external
Former Dynaflex employees had set up their
pressure. Eventually, after further assessment of
own manufacturing company, Unifluid, in the
the state of CRP’s IT systems, it was decided that
late 1990s, which had become one of Dynaflex’s
a full start-over integration project was required.
major competitors. The acquisition of Dynaflex
“We discussed the ERP and … knew that we was conditional on an acquisition of Unifluid as
had to replace it over time. In that way it well, since scale advantages could be derived
was simple.” CFO, Trelleborg Engineered from the combination of the two with Trelleborg.
Systems With Unifluid being a break-out from Dynaflex,
the outcome of the three-way acquisition
While Trelleborg rebuilt and improved the negotiation was uncertain for some time. As two
capabilities of CRP, Trelleborg’s IT function of the involved parties were direct competitors,
worked on replacing CRP’s outdated ERP with a negotiations were also hindered by their
Movex implementation. When this was completed unwillingness to disclose much information about
after two years, the corresponding unit from their operations.
Trelleborg (Trelleborg Viking) was moved onto Once the three parties had finally agreed
CRP’s new Movex platform, and scale benefits onterms and conditions that enabled the deal to
were realized by 2009, which marked the end of happen, Trelleborg needed to move quickly. The
the start-over IT integration project. sales manager of Trelleborg’s hose business unit,
CRP is an example of the advantage of who was leading the negotiations on behalf of
managing the risk in the acquisition of a business Trelleborg, drew up preliminary conditions that
he circulated through the management team in
21  The private equity fund that had owned CRP for some time had the hose business unit. While the IT function was
made very few long-term investments in the company.

12 MIS Quarterly Executive | March 2016 (15:1) misqe.org | © 2016 University of Minnesota
 Managing IT Integration Risk in Acquisitions

generally aware about the talks, uncertainty on extent risk driver for the IT integration project
whether the deal would eventually go ahead had was low.
limited its involvement. Next, the IT manager considered which IT
integration method would be required. Dynaflex
“One week before the deal was signed, was a small, efficient business with flexible
our sales manager came to me saying production. Replacing that with Trelleborg’s
that we were about to acquire Dynaflex. I central solution would destroy the very reason for
asked him, ‘What about IT? Do we need to the acquisition of the business.
support them on day one, or how do we do
it?’ ‘Good question, I’ll get back to you on “Dynaflex was a small, efficient and flexible
that!’ he replied. A few hours later, he came business. If we had implemented the full
back saying that they decided that the Movex package, we would have destroyed
seller would keep its IT alive for six months. that flexibility.” IT Manager, Trelleborg
After that, we had to have them over on Industrial Hose
our platform.” IT Manager, Trelleborg
Industrial Hose The IT manager realized, therefore, that a
complete rip and replace integration method
Given the six-month deadline for integrating would damage the acquisition value. However,
Dynaflex’s IT, the IT manager had to quickly given that only the production part of Dynaflex’s
assess the acquisition IT integration challenge. IT needed to be preserved, he saw that a bolt-on
To do this, he assessed the four risk drivers, IT integration method was possible. The rest of
starting with IT integration extent. Trelleborg Dynaflex’s IT could be migrated to Trelleborg’s
had a scale-based business manufacturing low- platform to enable shared purchasing, sales and
and medium-pressure composite hoses. Dynaflex financial reporting. This meant that the required
was a small, efficient and flexible producer of IT integration method was lower risk. Together
hydraulic hoses for high-pressure applications. with the lower extent risk, this meant the IT
The manufacturing processes for the two types integration challenge had low complexity.
of hoses are fundamentally different and were
not possible to combine. Completely absorbing “… we went through all processes in detail
Dynaflex into Trelleborg’s procedures for investigating if it really was possible to
composite hose production would destroy the work in that way.” Systems Integrator,
efficiency and flexibility of the acquired unit. Trelleborg Engineered Systems
However, the acquisition was motivated by the
In addition, the IT manager knew that the
opportunity for Dynaflex to expand its sales
IT organization was capable of facing another
through using Trelleborg’s established sales
acquisition IT integration challenge. The people
organization.
responsible for the IT integration of Dynaflex
“For each process, we investigated ‘How are had recently been involved with another, larger,
they doing it today?’ and ‘How should it be acquisition and had completely rebuilt the IT
done in the future?’” Systems Integrator, platform. Further, the IT manager knew that his
Trelleborg Engineered Systems organization could call on the same team that had
recently successfully integrated 13 production
Only after understanding the synergies units in the centralization project. Thus, the
expected from the acquisition could the IT integration novelty risk driver was low.
manager make an initial assessment of what
business processes needed to be IT integrated. “We had been the same team for three to
He realized that only a limited number of four years. We knew what worked. That was
processes (mainly purchasing, sales and financial why they asked me.” Systems Integrator,
reporting) needed to be integrated and that these Trelleborg Engineered Systems
processes were relatively low in terms of data
Finally, the IT manager assessed if the IT
intensity (compared to real-time data sharing of
organization was capable of meeting the six-
production, scheduling and logistics). Thus, the
month deadline. Compared to the Kléber and

March 2016 (15:1) | MIS Quarterly Executive 13

Managing IT Integration Risk in Acquisitions

CRP acquisition IT integration projects, which diligence team to assess potential roadblocks
had each taken several years to complete, the to benefits realization. Understanding the
integration of Dynaflex’s IT was completely conditions that may require a high-risk start-
different. Knowing that Trelleborg faced an over IT integration project is important because
acquisition IT integration project with a lower the start-over method can significantly delay
extent risk, lower method risk and lower novelty a substantial part of the projected business
risk, the IT manager was confident that the six- benefits of an acquisition. This method has to
month deadline would not pose a problem. This be used if neither the acquirer’s nor the target’s
knowledge gave Trelleborg a better negotiation existing IT systems can be modified to support
position in preparing the final transfer contract. the combined organization. This situation will
exist if (a) there is a fundamental IT misalignment
Framework for Assessing Risk with the post-acquisition business strategy in an
in Acquisition IT Integration acquisition that is made to strategically reposition
a business unit (as in Trelleborg’s acquisition of
Projects Kléber) and/or (b) it is not possible to scale up
When a potential acquisition target is the IT systems to the volumes of the combined
identified, the acquirer has to rapidly learn organizations (as in Trelleborg’s acquisition of
about the resources and capabilities of the target CRP).
to determine potential acquisition benefits Trelleborg eventually learned to take account
and weaknesses. Several factors constrain this of IT integration risks in the initial reviews of
learning process, including legal restrictions, acquisition targets by developing an awareness
unwillingness of the target to disclose of IT issues in the general management review
confidential information and limited availability teams and calling on IT managers when potential
of management attention. In addition, the time for risks where identified. With this approach, IT
the acquisition review process is typically short, integration risk was assessed progressively.
and there is large uncertainty about which deals It enabled Trelleborg to pursue its aggressive
in the acquirer’s target portfolio will eventually acquisition strategy (up to 10 a year) while
materialize. identifying high-risk IT integration acquisitions.
In Trelleborg’s later acquisitions, the Moreover, given that Trelleborg evaluated a
acquisition team took a progressive approach much larger number of potential acquisitions,
toward IT risk assessment and mitigation. the staged involvement of IT prevented the IT
Members of the acquisition team (including the function from being overwhelmed by requests to
CFO of Trelleborg Engineered Systems) were review all potential acquisitions.
sufficiently IT-savvy to broadly understand the Based on the approach developed by
overall method and extent of the IT integration Trelleborg for identifying and managing IT-
needed, and the degree to which this would related risk in acquisitions, we have created
put constraints on the realization of acquisition an Acquisition IT Integration Risk Assessment
benefits. When additional attention to IT was Framework (see Figure 4). For each of the
needed, the acquisition team informed the IT four integration risk drivers that can create IT
manager responsible for integration about the integration project challenges, this framework
plans, who would then assess the available identifies the critical questions to answer when
capabilities (integration novelty risk driver) and assessing acquisition IT integration risk, and the
timeframe (time pressure risk driver) needed to actions for mitigating the risks.
carry out the integration.
Trelleborg’s experiences show it is crucial Adjust the Framework for Your Unique
for general managers directly involved in due Context
diligence and contract negotiation to have a basic The Acquisition IT Integration Risk
understanding of the conditions in which IT Assessment Framework has been derived from
integration could be a critical threat to acquisition Trelleborg’s acquisition experiences. Having
benefits. They also need to understand when carried out 77 acquisitions over a 15-year period,
the IT function should be brought into the due Trelleborg can be considered a serial acquirer.

14 MIS Quarterly Executive | March 2016 (15:1) misqe.org | © 2016 University of Minnesota
 Managing IT Integration Risk in Acquisitions

Table 4: Acquisition IT Integration Risk Assessment Framework

Risk Driver Risk Assessment Risk Mitigation
Extent ●● What are the expected business synergies? ●● Gain full understanding of expected
(what to ●● What’s the extent of business processes to synergies.
integrate) be integrated to realize expected synergies? ●● Integrate what needs to be done, but
●● How well are business processes not more.
documented? ●● Assess each acquisition individually.
●● To what extent is the data required ●● Avoid political approaches—use cost
voluminous and structured? and fact-based decision making.
●● How much will future IT costs be when the ●● Reserve funding for capital
target is integrated? investments.
Method ●● How much business disruption is expected ●● Transition less complex systems to
(how to by employing potential methods? leverage most important synergies.
integrate) ●● How many new IT systems will be required ●● Consider multiple methods to
vs. redeploying existing systems? achieve expected synergies.
●● Is there a risk in the acquisition of “worst ●● If extensive integration is needed,
practice” replacing previously superior inform the CEO early.
business processes? ●● Proactively inform acquisition
●● Can existing IT resources be extended/ managers about more complex
enhanced to support the acquisition? integration scenarios.
●● Build an IT architecture for
acquisitions.
Time ●● Is there sufficient time for sustaining the ●● With new/complex integration
pressure target without IT integration right now? methods, consider delaying the
(source of ●● What’s the extent of internal pressure to integration if a new IT platform is on
pressure) realize synergies? the horizon.

●● How much freedom is there to maneuver? ●● Create realistic expectations for

timeframes to realize benefits.
●● How much pressure is there from investors
to realize synergies? ●● Manage public announcements
about the integration project and
●● What is the internal IT integration capacity? benefits.
Novelty ●● What is the level of internal know-how for ●● Document and execute best
(lack of IT integration? practices.
know-how) ●● How much new knowledge or capability ●● Engage business units to determine
is required to plan and implement the IT what is already known.
integration? ●● Seek advice from external sources on
●● Is the required knowledge related to prior success of similar projects.
business and/or IT? ●● Weigh the pros snd cons of using
●● Can we access the required knowledge— consultants for new tasks/challenges.
internally and/or externally?

March 2016 (15:1) | MIS Quarterly Executive 15

Managing IT Integration Risk in Acquisitions

However, in some regards, its experiences may be effects on realizing business benefits from an
unique. Compared to a one-time acquirer, some acquisition.
of the IT integration risks it faced may not be as Identifying that an acquisition is low risk
important (e.g., slight overspending). In addition, in terms of IT integration gives an opportunity
the dynamics between the risk areas may vary to focus on the acquisition review process
across industries. Trelleborg is an industrial rather than developing costly contingency
organization, and its acquisitions were primarily plans. However, there may be situations where
to increase the scale and scope of its operations. the acquirer finds it is facing a high-risk IT
In other industries, such as software and hi-tech integration project. In such a case, the acquirer’s
industries, acquisitions are commonly driven IT management should air these concerns to the
by innovation benefits. In these industries, time rest of the management team and ask them to
might be more critical. The risk management consider if taking that risk is justified.
framework should therefore be seen as heuristic By reviewing Trelleborg’s risk assessment and
guidelines and not a recipe-like cookbook, risk management strategies in the acquisitions of
and must be interpreted by well-informed Kléber, CRP and Dynaflex, we have distilled five
professionals in each given context. lessons that will help CIOs assess and manage IT-
It should also be recognized that Trelleborg’s related risks in acquisitions. The first is general,
approach to understanding IT integration risk focusing on how to act proactively to call in the IT
deviates from an ideal state where all potential function when needed to improve the chances of
risks are understood at the earliest point in the success. The other four address the IT integration
acquisition process. Over time, Trelleborg learned risk drivers in the framework.
that by using business managers experienced in
acquisitions (but also possessing basic knowledge Lesson 1: Educate General Managers to
of IT) and being prepared to wait for the financial Understand When to Call on IT
payoffs of IT integration, it was able to achieve IT management at a firm that is considering
a balance on when to involve the IT function. acquisitions should do two things. First, IT should
In essence, acquisition managers screened educate senior business managers (especially
targets and called on IT managers when needed. the CEO) on what type of acquisition will be
Inexperienced acquirers will likely need a more easy or more difficult from an IT integration
careful and robust approach to IT due diligence. perspective. Let the CEO know that it is possible
Finally, the Trelleborg acquisitions described to systematically explore the IT integration risk
in this article are synergy-seeking acquisitions early in the due diligence process. For this to
that require operational integration to be happen, business managers involved in the initial
successful. The IT risk assessment framework screening of potential acquisition targets must
therefore applies specifically to these kinds of understand when its necessary to call on the IT
acquisitions. Some acquisitions are made to function for a more extensive risk assessment.
secure possible future growth options, with no Second, IT management should consider
immediate intention to consolidate businesses. In how to quickly and comprehensively respond
these cases, the acquired businesses are typically to the announcement that the firm is to make an
kept separate and are therefore not a major acquisition. Using the Acquisition IT Integration
concern with respect to IT integration risk. Risk Assessment Framework can help to create
an action plan to manage the risk drivers before
Lessons for CIOs the deal is finalized. Recognize that while IT may
not be a starter in the acquisition game, it can be
Trelleborg’s experience shows that acquisition
a game finisher!
IT integration risk can be assessed and managed.
Trelleborg’s experiences (some painful)
However, managing the risk requires a systematic
taught business managers to recognize when
assessment of the risk drivers and their potential
IT could be a major threat to the acquisition.
impact. As illustrated by the three representative
For example, when acquiring CRP the business
acquisitions carried out by Trelleborg, lack of or
acquisition managers considered the Acquisition
incorrect IT risk assessment can have devastating
IT Integration Risk Assessment Framework,

16 MIS Quarterly Executive | March 2016 (15:1) misqe.org | © 2016 University of Minnesota
 Managing IT Integration Risk in Acquisitions

which made them very aware of the IT capital everything needs to be done immediately, as
investments needed and that the full IT occurred with Trelleborg’s acquisition of CRP.
integration of CRP would take considerable time. This approach has also been used by other
With experience from earlier acquisitions, the companies. For example, when Danske Bank
start-over integration project was completed acquired the Finnish Sampo Bank,22 it decided to
in less than two years. The IT organization was retain the IT systems of Sampo Bank’s relatively
called in and started the extensive integration small operations in Estonia, Latvia, Lithuania
project as soon as the CRP acquisition was and Russia until IT integration of the Finnish
announced. operation had been completed.

Lesson 2: Integrate Only What Needs to Lesson 3: Reduce Complexity Where

be Integrated (but Do Integrate What Possible
Needs to Be Integrated!) The complexity of acquisition IT integration
The IT management of an acquiring company projects varies significantly depending on the
should carefully assess what business processes integration method used. With some acquisitions,
need integrated IT. This assessment is necessary there are quick absorptions; others require a
because integrating IT is typically costly and adds multi-year project to build a completely new IT
risk to the acquisition. It is costly to migrate data platform.
between different systems, make connections When deciding whether to acquire CRP,
between systems, adjust to new ways of doing Trelleborg realized that to fully achieve the
business and educate users in the new IT systems. synergies between CRP and the corresponding
Moreover, replacing the target’s IT systems Trelleborg business unit it would have to face
might destroy the value of the business unit. As the risk of building a completely new IT solution
a consequence, the number of IT systems to be for the combined unit. Nevertheless, Trelleborg
integrated should not be excessive. still chose to move ahead with the acquisition.
On the other hand, integrating too few However, to reduce pressure on deciding
systems is also not desirable. IT integration is which IT integration method to use, Trelleborg
commonly a prerequisite for enabling business management decided to implement an interim IT
synergies. In addition, integration might provide solution that could enable enough synergies to
important cost savings related to scale in IT justify the acquisition. These synergies were the
operations. The lesson learned by Trelleborg is ones primarily communicated to stakeholders
that IT management should find the right balance at the time of the acquisition. Eventually, a new
between what should be integrated and what IT solution that could enable all the synergies
should not. was developed, further improving the financial
Trelleborg assessed all its acquisitions performance of the combined business unit.
individually to determine what should and should To manage acquisition IT integration risk,
not be IT integrated. The general acquisition complexity of the integration project should be
strategy was to buy business units with attractive reduced where and whenever possible. However,
resources that Trelleborg could develop further. sometimes a complete start-over project is the
Depending on how the resources could be only right decision to make. In this situation, it
developed within Trelleborg, it typically either might be necessary to explain the challenge that
left the IT of the acquired company undisturbed, lies ahead to the CEO and ask how badly he or she
fully absorbed the acquisition’s business wants this deal.
processes into the IT of an existing Trelleborg
business unit or made a selective choice of
specific processes to IT integrate. These different
strategies were illustrated with the acquisition
case examples described earlier.
To help reduce the integration extent risk 22  Acquisition of Sampo Bank completed, Stock Exchange An-
driver, it is important to determine whether nouncement No. 05/2007, Danske Bank, February 1, 2007, available
something can wait to be integrated or if at www.danskebank.fi/en-fi/About/Press/Pressreleases/Release-
archive/Pages/20070102_en.aspx.

March 2016 (15:1) | MIS Quarterly Executive 17

Managing IT Integration Risk in Acquisitions

Lesson 4: Leave Room to Maneuver new challenge, Trelleborg started a bolt-on IT

if Embarking on a High-Risk IT integration project that, after two years, was
Integration Project aborted and replaced with an interim solution,
Based on the Acquisition IT Integration Risk and eventually required a start-over project. The
Assessment Framework, there are three ways that IT integration following the Kléber acquisition
an IT integration project becomes riskier: took 10 years to fully complete! In contrast,
in its CRP acquisition Trelleborg realized that
●● The integration extent is high
a full transformation of IT was needed and
●● A complex IT integration method is needed therefore made sure it factored in ample time
●● The acquirer has not done anything like to successfully learn and execute an unfamiliar
this before (high integration novelty). integration method (start-over).
To manage the novelty risk driver, CIOs should
In retrospect, when Trelleborg acquired Kléber
give themselves time to acquire the missing
a short-term IT integration deadline would
know-how and also consider seeking advice from
have been just about impossible to meet. The
external consultants with a history of success in
integration extent was very great, the synergies
similar acquisition IT integration projects.
could be realized only by a complex integration
method and Trelleborg had no experience of
similar tasks.
Concluding Comments
In contrast, when facing a difficult IT When a potential acquisition target emerges
integration challenge, as with Trelleborg’s on the acquirer’s radar, the acquisition team
acquisition of CRP, putting a tight deadline on the needs to develop an understanding of the IT
integration project will likely make things worse. integration challenge and the prospects for
To manage the time pressure risk driver, extend successful IT integration. The Acquisition
the IT integration timeframe by (a) making sure IT Integration Risk Assessment Framework
that the acquired unit can be supported by its presented in this article will assist in this task.
existing IT systems as long as needed and (b) The framework is built around four important
not creating expectations of gaining benefits risk drivers—integration extent, integration
that in reality require time to implement the method, time pressure and integration novelty. By
enabling IT. Finally, if using the IT Integration Risk reference to Trelleborg’s acquisition experiences,
Assessment Framework early on shows that the we have shown how each of the drivers can be
risk is low, a short timeframe for the integration managed to reduce the potential negative risk
project can be set, as was the case in Trelleborg’s impacts of acquisition IT integration projects.
acquisition of Dynaflex.

Lesson 5: Understand Your Limitations Appendix: Research Methodology

Using the Acquisition IT Integration Risk
Assessment Framework helps an acquiring The data collection primarily comprised
organization understand the amount of IT in-depth face-to-face interviews with senior
integration risk it faces and is able to cope with. business and IT managers from Trelleborg AB
Some IT acquisition integrations are very difficult and several other companies that wish to remain
to complete and are subject to intense time anonymous. The study was a collaborative
pressure. Can the acquirer carry out the required research project that included business and IT
IT integration? Or does the acquirer think it managers at Trelleborg and researchers from
knows how to perform a sculpt or combine IT one of the author’s research institutions. The
integration project just because it previously research objective was to develop scientifically
managed to complete a few rip and replace grounded guidelines for managing acquisition IT
projects? integration. In addition to workshops and regular
When Trelleborg acquired Kléber, it had project meetings, 31 in-depth interviews were
already conducted several rip and replace conducted. Key areas of focus in the interviews
acquisition IT integration projects. Wrongly were the dimensions of synergistic potential,
generalizing from those experiences to the organizational integration, consolidation

18 MIS Quarterly Executive | March 2016 (15:1) misqe.org | © 2016 University of Minnesota
 Managing IT Integration Risk in Acquisitions

intentions, employee reaction, IT landscape, and international trade processes. Previous

integration architecture and the role of IT publications include more than 100 peer-
integration. refereed papers, published in journals including
Trelleborg was selected to illustrate the use Information Systems Journal, European Journal
of the risk management framework because of Information Systems, Journal of Strategic
it displays many general characteristics of Information Systems, Communications of the AIS
an acquirer, not least, the typically low direct and MIS Quarterly Executive.
involvement of IT managers in pre-acquisition
due diligence. However, Trelleborg has some William J. Kettinger
characteristics that set it apart from other Bill Kettinger (bill.kettinger@memphis.edu) is
acquirers—for example, industry, financial Professor and the FedEx Endowed Chair in MIS at
stamina and type of acquisitions made. Thus, the Fogelman College of Business and Economics
the framework developed from Trelleborg’s at the University of Memphis. Kettinger’s focus is
acquisition experiences must be considered as a practical, rigorous research appearing in leading
general, heuristic tool that has to be interpreted journals. He has received such honors as a Society
in a given context. of Information Management’s Best Paper Award
The research team has also investigated and directed a SIM APC study of the business
similar areas in other large, multinational drivers of IT value. He serves. or has served. on
companies to validate the findings from the editorial boards of MIS Quarterly, Information
Trelleborg’s experiences in a wider context. Systems Research, Journal of the Association of
Observations and updates on these companies’ Information Systems and MIS Quarterly Executive.
acquisition experiences were synthesized to
inform the longitudinal nature of the experiences
described in this article. The key points of these
acquisition experiences were recorded and
discussed by the two authors as they collaborated
on research projects.
In addition to the interviews, secondary
data from previously published cases and
other sources was used to further validate the
findings. Subsequently, nine interviews were
conducted with IT professionals with experience
of acquisition IT integration to validate a set of
initial guidelines for addressing the acquisition
IT integration challenge. During these interviews,
the IT professionals assessed the draft guidelines
based on their importance (how important is
the issue being addressed), accessibility (how
well is the advice conveyed) and suitability (how
appropriate is the advice given). Based on their
input, the guidelines presented in this article
were developed.

About the Authors

Stefan Henningsson
Stefan Henningsson (sh.itm@cbs.dk) is an
associate professor at Copenhagen Business
School, Department of IT Management. His
current research addresses managerial aspects
of IT in contexts that include corporate mergers
and acquisitions, global IT infrastructures

March 2016 (15:1) | MIS Quarterly Executive 19

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