IT DUE DILIGENCE for M&A
PRIVATE EQUITY NEEDS BETTER VALUATION, FINANCIAL MODELING, & RISK MITIGATION
IT Due diligence for M&A
IT costs account for a major chunk of the operational expenses for many companies, and the hidden inefficiencies of legacy IT infrastructure, systems, and databases of an M&A target can end up being a major headache for private equity firms. Unfortunately, the due diligence for M&A transactions often focuses on financials, accounting, contracts, and customers, while the underlying infrastructure that keeps the company operating is overlooked—or only gets a cursory glance and a nod.
IT due diligence could be handled internally by IT staff of the acquiring company, though sometimes it is overseen by accounting professionals as part of mergers and acquisitions assessments (not good). However, when merging or migrating systems of multiple entities will be required, even experienced IT departments can be overwhelmed by the complexity of the undertaking. The process should be undertaken by a third-party IT specialist with the knowledge, skill, and objectivity—not to mention dedicated experience in IT due diligence for M&A—to ensure a full and accurate understanding of current IT operations and expenses, risk factors, and how to merge, integrate, and migrate disparate infrastructures.
As an independent IT consultancy focused squarely on M&A, SubjectData ensures a complete, accurate, and unbiased assessment as part of your IT due diligence service.
OUR IT DUE DILIGENCE SERVICES
As part of SubjectData’s technical due diligence for M&A, our qualified consultants offer the following services:
At SubjectData, we take a four-pronged approach to IT due diligence that includes:
- Understanding business goals
- IT analysis
- Negotiating transactions
This process is designed to pinpoint IT strengths and weaknesses (“technical debt”) of the M&A target. Identifying risks can give private equity or the acquiring company leverage to negotiate the best possible purchase price (or in the case of the target company, the best possible sell price). In addition, SubjectData’s M&A experts work to create an advantageous integration and migration plan, accounting for details like licensing commitments, transition service agreements (TSAs), and more.
With SubjectData’s expert analysis planning, you avoid any “big surprises” when it’s time to start the actual IT integration, not to mention the unexpected costs and other business disruptions they bring.
Understanding business goals
When private equity firms arrange an M&A transaction, the primary goal of the IT portion of the process is to bring the two (or more) entities together from a technical operations standpoint. This may mean migrating one entity onto the other’s infrastructure (including its data) or it may mean integration the disparate infrastructure to work in harmony. This can be a complex process, but you may have other business goals you hope to accomplish. These should be considered during—not after—the IT due diligence process.
Some of these additional business goals may include:
Understanding your business goals allows us to focus our analysis to design actionable plans that drive the outcomes you expect.
Once we know your goals—both for the merger itself and beyond—we’ll begin the process of assessing your current IT status. This includes an audit for all entities involved in the M&A transaction:
This process is important for any company interested in curbing wasteful spending and planning for ongoing efficiencies, but it’s also a major component of mergers and acquisitions. With a clear understanding of IT assets and liabilities, your company can leverage the value and competitive benefits of streamlined IT to negotiate a favorable sale/purchase price and TSAs.
Obtaining optimal outcomes during merger negotiations relies on your ability to leverage known advantages. Once we’ve completed our assessment of your infrastructure, systems, and operations, we’ll help you to create a negotiation plan to account for:
Once M&A negotiations are complete, our end-to-end services continue with IT integration. SubjectData helps to streamline the integration process by outlining the following:
For mergers and acquisitions, the end goal of IT due diligence is not only to understand the overall state of IT, but to determine a pathway to integration. As part of our technical due diligence services for M&A, SubjectData can develop strategies to streamline and optimize the integration process, untangling a complex web of infrastructure, organization, and processes to create a clear and concise plan of action.
A TRUSTED ADVISOR TO NAVIGATE THE PITFALLS
You may have noticed that we firmly believe that, without proper IT due diligence, an M&A transaction that looks good to the finance and accounting teams might put the entities involved in operational hot water. We also know that while IT due diligence for a single internal migration project is something most IT departments can do, the complexities of assessing, identifying risk, and planning mergers and migrations for a successful merger requires the skills and experience not every IT staff has onboard.
We know that success boils down to partnering with a trusted advisor with the experience, expertise, and longevity to understand—and avoid—all the “gotchas” that can occur in critical M&A-related migrations like this. A partner you can trust with confidence, not only for IT due diligence, but from end to end should you need it. From upfront IT due diligence assessments and planning to building out the actual migration plan, selecting the appropriate migration tools, and performing and verifying the migration itself.
And like a true partner, we’ll be by your side for ongoing support to equip your team with the knowledge it needs to support the merged or newly formed entity going forward. That’s SubjectData’s promise.
IT DUE DILIGENCE CAN MAKE (OR BREAK)
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