How IT Carve-out Project Complexity Influences Divestor Performance in M&As

Philip W. Yetton, Stefan Henningsson*, Markus Böhm, Jan Marco Leimeister, Helmuth Krcmar

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

IT carve-out projects are complex and cost-intensive components of M&A transactions. Existing research sheds little light on the determinants of IT carve-out project complexity and/or its effects on divestor performance. Instead, research has focused on the post-acquisition IT integration project and acquirer performance. This paper presents the first divestor-centric model of IT transactions from the divestor to the acquirer when a Business Unit in a Multi-Business Organization (MBO) is carved out and integrated into another MBO. The model explains how divestor business and IT alignment pre-conditions contribute to increased IT carve-out project complexity. Such complexity increases IT carve-out project time to physical IT separation and creates IT stranded assets, which decrease post-divestment business, IT alignment and divestor performance. The current recommended strategy of adopting transitional service agreements (TSAs) to handle IT carve-out complexity is compared with two new proactive strategies derived from the model. TSA-based strategies restrict the divestor from both decommissioning IT stranded assets and reconfiguring its IT assets to support its new post-divestment business strategy. The two new strategies address IT carve-out complexity without incurring the negative effects from adopting TSAs.
Original languageEnglish
JournalEuropean Journal of Information Systems
Number of pages27
ISSN0960-085X
DOIs
Publication statusPublished - 14 Jul 2022

Bibliographical note

Epub ahead of print. Published online: 14 Jul 2022.

Keywords

  • Crave-out
  • integration
  • IT alignment
  • Divestment
  • IT stranded assets
  • M&A
  • Multi-business organisations
  • Theory building

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