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Cross-Business Information Technology Integration and Acquirer Value Creation in Corporate Mergers and Acquisitions

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  • Hüseyin Tanriverdi

    (Department of Information, Risk, and Operations Management, Red McCombs School of Business, University of Texas at Austin, Austin, Texas 78712)

  • Vahap Bülent Uysal

    (Department of Finance, Price College of Business, University of Oklahoma, Norman, Oklahoma 73019)

Abstract

This study develops and tests the idea that the cross-business information technology integration (CBITI) capability of an acquirer creates significant value for shareholders of the acquirer in mergers and acquisitions (M&A). In M&A, integrating the IT systems and IT management processes of acquirer and target could generate benefits such as (a) the consolidation of IT resources and the reduction of overall IT costs of the combined firm, (b) the development of an IT-based coordination mechanism and the realization of cross-firm business synergies, (c) the minimization of potential disruptions to business operations, and (d) greater ability to comply with relevant laws and regulations and the reduction of regulatory compliance costs. We test these ideas in a sample of 141 acquisitions conducted by 86 Fortune 1000 firms. In the short run, acquirers that have high levels of CBITI capabilities receive positive and significant cumulative abnormal returns to their M&A announcements. Announcement period returns indicate that the capital markets value CBITI similarly in same-industry and different-industry acquisitions. In the long run, acquirers with high levels of CBITI capabilities obtain significantly higher abnormal operating performance. They create significantly greater value in complementary acquisitions from different industries than in related acquisitions from the same industry. The findings have important implications for M&A research and practice.

Suggested Citation

  • Hüseyin Tanriverdi & Vahap Bülent Uysal, 2011. "Cross-Business Information Technology Integration and Acquirer Value Creation in Corporate Mergers and Acquisitions," Information Systems Research, INFORMS, vol. 22(4), pages 703-720, December.
    • Handle: RePEc:inm:orisre:v:22:y:2011:i:4:p:703-720
    DOI: 10.1287/isre.1090.0250
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    References listed on IDEAS

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    2. Bouteska, Ahmed, 2019. "The effect of investor sentiment on market reactions to financial earnings restatements: Lessons from the United States," Journal of Behavioral and Experimental Finance, Elsevier, vol. 24(C).
    3. Zhuo (June) Cheng & Arun Rai & Feng Tian & Sean Xin Xu, 2021. "Social Learning in Information Technology Investment: The Role of Board Interlocks," Management Science, INFORMS, vol. 67(1), pages 547-576, January.
    4. Stefan Henningsson & Christian Øhrgaard, 2016. "IT Consultants in Acquisition IT Integration," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 58(3), pages 193-212, May.
    5. Serhiy Kovela & Amanda Annandale & Brett Annandale & Peter N. Jackson, 2024. "Post-merger IT Integration in Banking: Literature Review," International Journal of Business and Management, Canadian Center of Science and Education, vol. 18(6), pages 1-77, January.
    6. Jason K. Deane & David M. Goldberg & Terry R. Rakes & Loren P. Rees, 2019. "The effect of information security certification announcements on the market value of the firm," Information Technology and Management, Springer, vol. 20(3), pages 107-121, September.
    7. Zou, Peng & Li, Guofeng, 2016. "How emerging market investors' value competitors' customer equity: Brand crisis spillover in China," Journal of Business Research, Elsevier, vol. 69(9), pages 3765-3771.
    8. Kui Du, 2015. "Research Note—Parenting New Acquisitions: Acquirers’ Digital Resource Redeployment and Targets’ Performance Improvement in the U.S. Hospital Industry," Information Systems Research, INFORMS, vol. 26(4), pages 829-844, December.
    9. Liwei Chen & J. J. Po-An Hsieh & Arun Rai, 2022. "How Does Intelligent System Knowledge Empowerment Yield Payoffs? Uncovering the Adaptation Mechanisms and Contingency Role of Work Experience," Information Systems Research, INFORMS, vol. 33(3), pages 1042-1071, September.
    10. Khansa, Lara, 2015. "M&As and market value creation in the information security industry," Journal of Economics and Business, Elsevier, vol. 82(C), pages 113-134.
    11. Nazila Razi & Elizabeth More & Gensheng Shen, 2021. "Risk Implications for the Role of Budgets in Implementing Post-Acquisition Systems Integration Strategies," JRFM, MDPI, vol. 14(7), pages 1-24, July.
    12. Jaime B. Windeler & Likoebe Maruping & Viswanath Venkatesh, 2017. "Technical Systems Development Risk Factors: The Role of Empowering Leadership in Lowering Developers’ Stress," Information Systems Research, INFORMS, vol. 28(4), pages 775-796, December.
    13. Boone, Audra & Uysal, Vahap B., 2020. "Reputational concerns in the market for corporate control," Journal of Corporate Finance, Elsevier, vol. 61(C).
    14. Meltem Özturan & Meltem Mutlutürk & Burç Çeken & Burçin Sarı, 2019. "Evaluating the information systems integration maturity level of travel agencies," Information Technology & Tourism, Springer, vol. 21(2), pages 237-257, June.
    15. Qiu-Hong Wang & Kai-Lung Hui, 2017. "Technology Mergers and Acquisitions in the Presence of an Installed Base: A Strategic Analysis," Information Systems Research, INFORMS, vol. 28(1), pages 46-63, March.
    16. Garcia-Canal, Esteban & Rialp-Criado, Alex & Rialp-Criado, Josep, 2013. "Speed of ICT integration strategies in absorptions: Insights from a qualitative study," European Management Journal, Elsevier, vol. 31(3), pages 295-307.

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