Mergers and acquisitions in the logistics space are expected to remain steady, if not increase, in 2023. Private equity firms and holding companies are targeting the sector in response to an increased awareness of supply chain fragility in the wake of the COVID-19 pandemic.

When companies are merged or acquired, there are many structural considerations that must be addressed, including how to combine, consolidate and integrate disparate systems and applications across the merging entities’ respective IT landscapes. But a more subtle consideration is this: How should newly acquired or merged companies’ IT systems be replaced, reconnected or consolidated with those of the acquirer?

It rarely makes sense to completely scrap an acquired company’s IT resources just because the acquirer is more familiar with its own technology. And while the acquirer almost always has more decision-making power in such situations, if it’s unhappy with its current IT setup, it will likely be open to learning more about the acquired company’s strategy. 

In fact, The acquiring company has several options, including whether to consolidate similar systems, replace one organization’s tech with that of another, or scrap both and implement an entirely new set of applications.

Inevitably, some systems will have to be replaced. Which tools are ultimately selected for retirement will depend on a careful assessment of the IT landscape, to identify areas of redundancy, opportunities for cost savings, and the best approach to consolidating platforms across organizations. 

The first step when undergoing M&A processes is to exercise due diligence — a full assessment of the acquired company’s operations, processes and applications. Typically, both companies will internally evaluate their own technology stacks. During this assessment, they will identify any overlaps in software, which might involve duplicates of the same system, or two different ones that execute the same function. The process inherently involves a lot of debate between any two entities, but the decision is made even more difficult for supply chain-oriented businesses.

Such organizations tend to have unique relationships with trading partners, suppliers and customers. Often, the success of those relationships depends on capabilities that have been developed over the years to handle specific functions. In the early stages of a merger, they will need to stay separate, so as not to disturb processes and distribution networks that are already in place — even if it makes sense to combine them further down the road.

So how can companies develop a strategy to consolidate IT landscapes to ensure end-to-end visibility across operations, all while keeping business relationships separate?

It’s inevitable that some redundant systems will remain in place for the sake of business and supply chain network continuity. During that time, merged companies need a way to connect information so that the acquirer has full visibility of the acquired company’s operations.

Integration platforms, designed to handle any-to-any file transfers, electronic data interchange (EDI) and, more recently, application programming interface (API)  connectivity, are an essential tool in such situations. Rather than depend on separate integration tools, including those that were built in-house to address specific business needs, companies can speed up B2B integration through the deployment of a one-stop platform that can connect disparate business systems.

Modern cloud-based or software-as-a-service (SaaS) integration platforms enable the two companies to maintain their own environments, while gaining control and visibility across both. This can be useful when one or both are relying on legacy or onsite systems that can’t be scrapped due to one company’s dependence on their unique capabilities. 

As competition heats up in the supply chain space, profit margins get slimmer, and companies seek mergers or acquisitions to create larger and more resilient entities. But just because a business owns more market share doesn’t necessarily mean it’s more efficient. 

Companies need to operate at peak productivity in today’s unpredictable world. With a modern system for integrating ecosystems, acquiring companies can make the consolidation of IT systems a breeze, and speed up time to value.

Dave Brunswick is vice president, solutions with Cleo.