Technical Due Diligence / M&A
Understand the risks and opportunities associated with technology that extend beyond the scope of the current M&A team.
Mergers and Acquisitions can result in rapid advancement for a company. Although M&As can lead to major growth, they also come with lots of uncertainty. With our multiple years of experience and our in-depth knowledge of IT strategies, marketing, and finance and change management, we have developed a system to help optimize a company’s business strategy. With a special focus on tech due diligence to our divestiture management, we are with companies every step of M&A deal cycle (Pre Deal, Deal, Post Close) offering valuable insights.
Pre Deal
Acquisition Planning
Developing a good acquisition strategy requires that the acquirer having a clear idea of what will be gained from making the acquisition. We want to set clear criteria, to find the right target company to maximize overall profit. We will help you with Deal Ccouring and will prepare the letter of intent and term sheets to start the M&A process.
Deal
Current status of IT Capabilities
We start with an assessment of existing IT systems, an assessment of IT infrastructure, a review of IT organization, and an assessment of IT processes.
IT infrastructure assessment: What IT hardware or lease commitments are in place? What network infrastructure is in place? Who are the service providers? What problems or issues are there? Are there issues with transferring software licenses when the business changes ownership? What is the market or liquidation value of certain equipment?
IT systems assessment: What application systems are installed, and what condition are they in? Are they appropriate for a company of this size and in this industry? If they are packaged systems, how well are they supported by existing staff or vendors? Are the users satisfied?
IT organization: What is the size of the existing IT staff and how good are their skills? How does the number of IT staff and the composition of the staff compared to other companies in this industry?
IT processes: What are the current processes for application development, IT operations, disaster recovery, IT security, and cost management? What IT management best practices should be implemented?
Scalability
Based on our assessment of the target organization's current IT capabilities, we evaluate whether the IT infrastructure is scalable to support anticipated growth. We also identify corrective actions needed to address current issues and outline future scenarios for IT. Future scenarios could include expanding, upgrading, or replacing specific systems, integrating IT operations into a new parent company or another department, outsourcing some or all IT functions, or implementing a new IT architecture for the business. Scenario planning can be conducted as part of the initial IT assessment or in greater depth as a follow-on project.
Risk Assessment
In a merger or acquisition, an effective IT due diligence process can minimize risk, improve the likelihood of success, and increase the value of the business. The same considerations apply when we perform an IT assessment for internal purposes.
Disaster Recovery and Business Continuity: Are IT systems adequately secured against intruders or known vulnerabilities? Is there a disaster recovery plan in place? Are backup/recovery procedures implemented and tested? In regulated industries (e.g., life sciences), is there a risk of non-compliance?
New Initiatives: What system development projects are underway? What is the status? Should they be continued? What should be done to ensure successful implementation?
Key Personnel: Who are the key resources that need to be retained? What actions should be taken to mitigate the risk of losing these key personnel?
Budget Analysis
In some cases, IT organizations have a cost structure that is higher than necessary. In other cases, the organization is spending too little compared to its industry peers. Our modeling capabilities will provide you with an overview as to where your company should be on the IT budget continuum.
Benchmark IT spending and staffing levels. How do IT spending and staffing levels compare to other companies in this industry? Should the organization spend more or less on IT? Seems similar to budget analysis – if not differentiate more
Cost savings opportunities. Are there opportunities to consolidate data centers or servers to create value or improve performance? What maintenance, telecom and service contracts are in place? Are the rates competitive? Is there unneeded or unused coverage? Can certain IT functions be performed more cost-effectively through outsourcing? If already outsourced, can certain functions be performed more cost-effectively in-house?
Post Close
Post-Merger Integration
After the deal closes the post-merger integration (PMI) starts and includes merging both IT landscapes, and HR and culture. In this transformation phase, it is imperative to exploit optimization potential and make the transition as risk-free as possible. It is important to ensure the necessary structural and process knowledge and to minimize the dependencies on personnel, IT applications and the IT infrastructures required for this.
In the analysis phase we identify personnel who exhibit in-depth knowledge of the IT process and we create a plan as to how this knowledge will be transferred. We also ascertain areas of IT know-how which will need to be bolstered. In addition, an inventory of the knowledge already available in the target organization will be made. It is crucial to map the process and organizational structure in the IT landscape for the primary, secondary and third-party processes. A mapping of the modules used and centrally important interface systems is just as much a prerequisite as an IT roadmap for the future company that correlates with the initial merger goal.