How It Carve-Out Project Complexity Influences Divestor Performance in M&As

European Journal of Information Systems (EJIS), 32 (6), 926-988

41 Pages Posted: 8 Aug 2022 Last revised: 27 Nov 2023

See all articles by Phillip Yetton

Phillip Yetton

University of New South Wales (UNSW)

Stefan Henningsson

Copenhagen Business School

Markus Böhm

Independent

J. M. Leimeister

University of St. Gallen; University of Kassel - Information Systems

Helmut Krcmar

Technische Universität München (TUM)

Date Written: July 14, 2022

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.

Keywords: Carve-out, integration, IT alignment, divestment, IT stranded assets, M&A, Multi-Business organisations, theory building

Suggested Citation

Yetton, Phillip and Henningsson, Stefan and Böhm, Markus and Leimeister, Jan Marco and Krcmar, Helmut, How It Carve-Out Project Complexity Influences Divestor Performance in M&As (July 14, 2022). European Journal of Information Systems (EJIS), 32 (6), 926-988, Available at SSRN: https://ssrn.com/abstract=4168988

Phillip Yetton

University of New South Wales (UNSW) ( email )

Kensington
High St
Sydney, NSW 2052
Australia

Stefan Henningsson

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Markus Böhm

Independent

Jan Marco Leimeister (Contact Author)

University of St. Gallen ( email )

Varnbuelstr. 14
Saint Gallen, St. Gallen CH-9000
Switzerland

University of Kassel - Information Systems ( email )

Pfannkuchstraße 1
Kassel, 34121
Germany

Helmut Krcmar

Technische Universität München (TUM) ( email )

Arcisstrasse 21
Munich, DE 80333
Germany

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