Marriage Made in Heaven – Post Merger Integration

With the announcement of merger between Mahindra Satyam and Tech Mahindra yesterday, analysts are upbeat about the future prospects of the company. The combined entity will become the fifth-largest IT company in terms of market capitalization. It will cater to more industry verticals in comparison to the standalone basis. So it stands a good chance of getting bigger business and more clients and breaking into the top tier of Indian infotech companies.

The benefits of the merged company will be made possible by a successful integration between the two companies. The company management foresees a period of six months for completion of the ‘complex’ post merger integration (PMI) process.

The integration process may touch upon several areas. It will entail the integration of the MIS platforms of the two companies. It appears that Satyam had close to 190 MISs earlier, many of which were not integrated, resulting in manual intervention for transposing data from one system to another. According Mr Vineet Nayyar, Chairman of Mahindra Satyam, this left scope for discrepancies in many cases. The MIS systems at Mahindra Satyam will now be integrated with the Oracle- PeopleSoft platform being used at Tech Mahindra. The post merger integration of the two organizations may also result in removal of significant duplication of corporate functions besides synergising sales and operations. Thus synergies will be realized through integration, by achieving cost reductions or bringing about revenue enhancements.

It will be an equally long drawn process to measure the success of integration. It is to be remembered that while organizational integration is necessary to reap synergies, but it also results in disruption due to uncertainty associated with organizational change, loss of motivation, turnover, changes in power dynamics and independence of decision making. Net gains from integration will accrue only when the benefits from collaboration exceed the costs of disruption.

Since integration is always costly, it will be crucial to have competent implementation and decide carefully on appropriate integration level such that for any given level of integration, gains are realized with lower costs of integration.

The other issue that impacts integration is the cultural alignment between the two organizations, which at times is very hard to bridge. Having worked with both the organizations, I can say thankfully that in this case though, the cultural alignment should not be very difficult to achieve owing to similar culture between the two organizations. However it still pays to be aware of any subtle cultural differences that might exist.  Overall a well communicated implementation strategy should be good.
As said by the management, “the Mahindra Satyam-Tech Mahindra merger appears to be a marriage made in heaven, and if they can execute their future business properly, one can expect the ‘honeymoon’ period to last longer.”

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