The Effects of Information Systems Compatibility on Firm Performance Following Mergers and Acquisitions

Abstract

ABSTRACT This study investigates the consequences of information systems compatibility between the target and acquirer firms in the context of mergers and acquisitions (M&A). Using a unique data set of ERP implementations, we find that acquirers using the same ERP vendor as their targets exhibit shorter post-merger operating cycles and shorter post-merger audit delays relative to acquirers with different ERP vendors than their targets. In supplemental analysis, we find evidence that acquirers with the same ERP vendor as their target also exhibit more accurate management forecast guidance following the acquisition. The findings of this study should be of interest to capital market participants and managers involved in M&A activity by providing evidence about how the degree of compatibility between acquirer and target ERP systems impacts post-merger activities across different economically significant functional areas.

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