M&A Activity Can Lead to Support Disruption

Park Place Technologies


Parker February 21, 2014

Merger and acquisition (M&As) activity in any industry brings a measure of uncertainty to customers. IT managers often face challenges brought on by OEM M&As that create unpredictable hardware maintenance circumstances and cause confusion that makes it difficult to develop hardware strategies until new policies are figured out.

Many businesses cannot afford uncertainty and need to carefully control their IT budgets to avoid waste and stay ahead of the competition. To understand the scale of M&A challenges, look no further than recent history, where there are plenty of examples of problems created by M&A efforts. In many cases, the company making the purchase ends up facing as many challenges as the customers who are adversely affected by the deal.

Looking at M&A disasters

A February 2013 Wall Street Prep report showcases an infographic from a due diligence specialist that highlights some of the worst M&As in history.

One standout merger and acquisition was when Quaker purchased Snapple in 1994, the infographic explained. At the time, Snapple expected to use the deal to replicate the success it had when it bought Gatorade. The problem was that Quaker did not have the core competencies necessary to handle Snapple’s business and also failed to develop necessary competitive analysis of the industry. Quaker lost approximately $2 million a day while it owned Snapple, totaling $1.4 billion through the duration of the deal.

In 2005, Sprint purchased Nextel in an effort to gain access to wireless resources quickly, according to the news source. The deal was solid, but the results were troublesome. Nextel and Sprint used incredibly different technologies and had different corporate cultures. This led to major problems aligning systems, even billing solutions, between the two companies. Furthermore, Nextel’s executives left shortly after the deal because they were unhappy as part of the Sprint culture. Sprint ended up losing approximately $29.5 billion in the process.

Avoiding problems caused by M&As

Customers and companies involved in an M&A can all face damages and disruption caused by the uncertainty of such activities. So much can go wrong when two organizations try to mesh with one another that customers can be left unable to maintain their internal standards of operation.

IT managers dealing with M&A uncertainty only need to consider the Sprint-Nextel deal to understand how much things can go wrong. The technological differences between the two organizations were so great that reconciling systems was an overwhelming burden. What if the same issue arose between two data center hardware manufacturers? An OEM may do a good job handling M&As, but there is always some degree of uncertainty and the reality is that the people with no control over the situation are the customers.

Businesses are facing a new economic reality in which they cannot afford to waste resources. Maximizing fiscal and technological efficiency hinges on being able to control where money goes, what it is used for and when it is spent. IT managers that need to maintain this control can turn to a third-party hardware maintenance plan to avoid the disruption and uncertainty that comes with any type of OEM M&A arrangement.

Developing a partnership with a third-party hardware maintenance provider enables IT managers to take control over their support plans by gaining access to a flexible maintenance model. This doesn’t just protect against disruption caused by M&As, but can also shield companies from the vagaries of end-of-service-life announcements and high extended warranty costs.

About the Author

Parker, Park Place Assistant