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5 reasons why conducting IT due diligence is important

In reality, there are more likely to be multiple reasons behind any M&A failure. However, it’s certainly true that due diligence is vital to post-merger integration (PMI) success. And here are five reasons why.

There are always various statistics bandied about regarding the number of M&A deals that fail. And one of the reasons often given for this failure is a lack of IT due diligence.

In reality, there are more likely to be multiple reasons behind any M&A failure. However, it’s certainly true that due diligence is vital to Post-Merger Integration (PMI) success. And here are five reasons why.


 5 reasons why conducting IT due diligence is important


1. You need to know how much resource to allocate

Unless you know what you’re dealing with in terms of software, hardware, support and maintenance, it can be impossible to try and allocate the right level of resource.

A full inventory of all assets is necessary before you can begin to assess how much manpower and time you’re going to need to allow for each phase of the transition. The target company may be initially reluctant to give away too much information in the early stages. But by embarking on a process of due diligence, you can start to win over their trust. And this leads to our next point.

2. You need a structured approach to gain buy-in

As part of the due diligence process, you’ll need to talk to IT teams on both sides of the merger. This gives you the opportunity to assess people’s skills and start to gain their trust.

If you show you’re going about the project in a structured, methodical way, then employees are more likely to be persuaded of its credibility. It’s a demonstration of the fact that you’ve considered the team and its people as well as the technology.

3. You can’t draw up accurate technical plans with incomplete information

Creating a credible plan with realistic timescales is essential to any PMI project. But how can you do this if you don’t have all the information you need?

Your project plan and associated technical designs must be as accurate as possible for integration to succeed. And to achieve this, you need to know the types of technology being used by acquired and acquiring company.

It’s impossible to draw up a plan to combine two different IT infrastructures without knowing exactly what technology is in place and how it’s being used.

4. You need to align technical expertise

Due diligence is a process of gathering and recording as much information as you can within your allotted time-frame. And this doesn’t just include making an asset inventory.

It’s also about identifying the technical expertise you have within your teams. When it comes to specific technologies, particularly if R&D work is involved, it’s crucial to align people with the right level of expertise and knowledge to oversee particular aspects of the integration.

Each M&A deal brings its own set of complexities (these may be industry-specific), and you need to ensure you retain the technicians within your teams that can help you work out a transition plan for certain phases of the project.

5. You need to know who owns key intellectual property

During the process of due diligence, you may find that the intellectual property you assumed you purchased doesn’t actually belong to the acquired business. Or you may discover it relies on certain technology that can’t be transferred to you.

If this is discovered late in the integration process, the results can be costly. Suddenly you have to find a workaround, and this generally involves throwing additional resource at the problem.


 5 reasons why conducting IT due diligence is important


Plan for PMI success

If you’d like to know how to prepare your teams and systems for post-merger integration success and gain maximum value from your IT, contact us for a friendly discussion regarding your particular business needs on 0800 622 6719.


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Picture of Hutton Henry
Hutton Henry
Hutton has worked with Private Equity Portfolio firms and Private Equity funds since 2015. Having previously worked in post-merger integration for large firms such as Ford and HP, Hutton understands the value of finding issues prior to M&A deals. He is currently the founder of Beyond M&A and provides technology due diligence for VC, PE and corporate investors, so they understand their technology risks before entering into a deal.

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