Opinion

The Role of Web Services in Mergers and Acquisitions

Web Services provides a cost-effective way for IT to help achieve corporate merger goals and to contribute significantly to fast, reliable merger synergies. A growing number of companies are using Web Services after a merger.

By Bob Anderson, Eric Stettler

August 09, 2005 — CSO —

Witnessing the flurry of Web Services activity over the past few years, companies are turning to this technology for more than internal integration. They have discovered that the benefits of seamless interoperability, platform independence, speed and cost can apply to merger and acquisition (M&A) transactions as well. Web Services provides a cost-effective way for IT to help achieve corporate merger goals and to contribute significantly to fast, reliable merger synergies. A growing number of companies are using Web Services after a merger for the following reasons:

Strategy alignment: Web Services forms the foundation of many business and IT strategies to support customers, partners and internal integration. As a result, the use of Web Services to heighten M&A synergies may be aligned with current IT strategy investments.

Speed: Speed is key to successful merger integration, and targeted Web Service interfaces can help to quickly deliver IT synergies for functional areas. The IT organization becomes a key enabler of the resulting cost savings instead of a neutral participant.

Support: Web Services is embedded in current enterprise applications. Many enterprise application vendors (such as SAP, SAS, Oracle and Siebel) have newer versions of their software that support Web Services and service-oriented architecture (SOA) standards. Enterprises with these applications may already have a robust Web Services architecture that can ease the M&A transition.

Limited initial investment: If the merging companies already have Web Services functionality, the costs of IT integration should be minimal. However, for companies with older technology, the initial Web Services investment at the time of the merger could be cost prohibitive.

Platform independence: By its very nature, Web Services technology is independent of hardware and software platforms or application development object models. This platform independence facilitates the use of Web Services as a beneficial enterprise application integration (EAI) tool.

THREE KEY TESTS

"Don't destroy what you buy" is a simple goal, yet exceedingly difficult to fulfill. Only half of all mergers create lasting shareholder value; and just under one-third exceed expected industry returns. Understanding exactly where and how value is created, and protecting those sources, will improve the odds for merger success.

We have worked with many clients to ensure M&A synergies that quickly boost the bottom line. The savings from such synergies can be used to fund more strategic integration efforts, such as IT portfolio integration, which take more time and planning. In our experience, it becomes clear when Web Services is an appropriate M&A integration technologyand when its not.