Make IT a Partner in Successful M&A Due Diligence

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Many organizations are unaware of the essential role IT plays prior to executing a merger or acquisition.
IT-related activities are usually the largest cost items in an M&A, and when these costs are overlooked or underestimated, it can end up costing organizations millions in additional costs down the road.
Even if IT is involved early, the time between the Letter of Intent and the signed deal may be as little as three to four weeks.

Our Advice

Critical Insight

To mitigate risks and create accurate cost estimates, the CIO must force their way into the M&A conversation before the deal has closed.
Gathering and analyzing information is an iterative process that is ongoing throughout due diligence. Update your assumptions, risks, and budget as new information is obtained.
Communication with the M&A team and business process owners should be constant throughout due diligence. IT integration does not exist in isolation.

Impact and Result

CIOs have to force their way into the conversation during the due diligence phase, before the deal is closed and it is too late to make changes or price adjustments.
The CIO has a line of sight into IT integration considerations that the business often does not consider or take into account. As such, the CIO has an obligation to explain the IT cost implications of the M&A to the business in order to ensure they understand the whole picture before they make their decisions.
The CIO needs to collect information on both their own organization and on the target organization, analyze the information, and then make critical assumptions to define the resultant IT enterprise. By doing this, the CIO can provide the M&A team with the accurate cost information they require to make holistic decisions.

Make IT a Partner in Successful M&A Due Diligence Research & Tools

1. Investigate challenges and benefits

Having IT involved in the M&A process from the beginning can lead to reduced operating costs, quicker decision making, and increased synergy capture.

2. Gain executive buy-in

It is essential that the IT team and CIO are aligned with the M&A business goals and objectives.

3. Determine current state of target organization

Collect as much information as possible about the target organization.

4. Consider current state of own organization

Recognize the key pieces of information that should be gathered about the current state of your own organization.

5. Define resultant enterprise

Understand the resultant business end state, and design the target end-state environment for IT.

6. Close gaps and estimate costs

Develop assumptions to close M&A gaps, and finalize IT investment costs.

Member Testimonials

After each Info-Tech experience, we ask our members to quantify the real-time savings, monetary impact, and project improvements our research helped them achieve. See our top member experiences for this blueprint and what our clients have to say.

Client

Experience

Impact

$ Saved

Days Saved

Testimonial

Jet Support Services, Inc.

Guided Implementation

10/10

$12,733

Very focused and collaborative discussion on my specific requirements

Blommer Chocolate Company

Guided Implementation

10/10

$12,733

Provided a great perspective and advice on how a CIO should best prepare for the initial meetings with the acquiring company.

Care New England Health System

Guided Implementation

8/10

N/A

Workshop: Make IT a Partner in Successful M&A Due Diligence

Workshops offer an easy way to accelerate your project. If you are unable to do the project yourself, and a Guided Implementation isn't enough, we offer low-cost delivery of our project workshops. We take you through every phase of your project and ensure that you have a roadmap in place to complete your project successfully.

Module 1: Launch Due Diligence

The Purpose

Determining IT’s current capability to support an M&A transaction.
Identifying the goals and objectives the business has for the M&A.
Gaining the buy-in of the M&A team and executive management for IT’s involvement with M&A due diligence.

Key Benefits Achieved

Capability for IT to successfully support the business throughout the M&A transaction determined.
M&A business goals and objectives identified.
IT due diligence team selected.
Gaining buy-in for IT’s involvement in M&A due diligence.

Activities

Outputs

1.1

Complete & review M&A health check

Assessment of M&A capabilities

1.2

Gain executive buy-in for IT involvement in M&A due diligence

PowerPoint presentation to make the case for IT involvement in M&A due diligence

1.3

Identify M&A business goals and objectives

List of M&A business goals and objectives

1.4

Assemble the IT due diligence team

List of IT due diligence team members

1.5

Define success metrics

List of business and IT metrics

Module 2: Gather Information

The Purpose

Taking a structured due diligence approach that properly evaluates the current state of each organization involved in the M&A transaction.
Retrieving critical information from the target organization to help determine the attractiveness of the M&A target.
Examining the needs of each organization based on analysis of application and data, infrastructure, IT people, and IT processes at each organization.

Key Benefits Achieved

A clear understanding of the steps that are involved with gathering information on both the target organization and the buying organization.
Recognition of the various methods of collecting information from the target, the iterative nature of the collection and documentation process, and the format in which information should be recorded.
Understanding the considerations that need to be made when looking at the current state of each organization.

Activities

Outputs

2.1

Determine the business capabilities of the target organization

Business capability map of the target organization

2.2

Prepare a list of questions for the target organization

Information request for target organization

2.3

Create a strategy for on-site discovery

On-site discovery strategy

2.4

Retrieve or create a business capability map for the buying organization

Business capability map of buying organization

2.5

Identify the master data domain, data sources and system of record at the buying organization

List of master data domains, data sources, and system of record identified

2.6

Retrieve (or create) an applications inventory and map to business capabilities at the buying organization

Application inventory and mapping

2.7

Identify and consider infrastructure at the buying organization

List of infrastructure considerations

2.8

Identify and examine important IT processes at each organization

Inventory and analysis of important IT processes

2.9

Retrieve (or create) an IT organizational chart and examine the current IT staff at the buying organization

IT organizational chart and evaluation of staff based on competency and capacity

Module 3: Perform Analysis

The Purpose

Understanding how the business sees the resultant capabilities in the newly formed organization and determining the best way to support them.
Selecting a target technology environment that is aligned with the business objectives for the M&A.
Identifying gaps, redundancies, and initiatives for each business domain, and selecting the appropriate IT integration strategies to achieve the target technology environment.

Key Benefits Achieved

Identification of the ideal post-M&A target technology environment.
Recognition of the key considerations when determining the appropriate combination of IT integration strategies.
Vision of the IT organizational design for the resultant enterprise.

Activities

Outputs

3.1

Define the resultant enterprise capability map

Resultant enterprise capability map

3.2

Select the target technology environment

Target technology environment

3.3

Analyze data and application gaps and redundancies, then determine the IT integration strategies

Analysis and integration strategy for data and applications

3.4

Identify the resultant enterprise’s infrastructure needs

Infrastructure needs for the resultant enterprise

3.5

Identify IT process gaps and redundancies

IT process gaps and redundancies in the resultant enterprise

3.6

Identify IT people needs and redundancies

IT people needs and redundancies in the resultant enterprise

Module 4: Estimate Costs

The Purpose

Developing assumptions to estimate the remaining capital and operating costs that have not yet been reflected in the integration budget.
Preparing the IT Due Diligence Report for final submission to the M&A team.

Key Benefits Achieved

Recognition of how to create an IT integration budget for the M&A transaction during due diligence.

Activities

Outputs

4.1

Develop assumptions to close remaining M&A gaps

Develop assumptions to close remaining M&A gaps

4.2

Finalize IT investment costs and synergies

IT investment costs and synergies finalized

4.3

Finalize the IT Due Diligence Report

IT Due Diligence Report finalized

About Info-Tech

Info-Tech Research Group is the world’s fastest-growing information technology research and advisory company, proudly serving over 30,000 IT professionals.

We produce unbiased and highly relevant research to help CIOs and IT leaders make strategic, timely, and well-informed decisions. We partner closely with IT teams to provide everything they need, from actionable tools to analyst guidance, ensuring they deliver measurable results for their organizations.

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Table of Contents

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Guided Implementation 1: Launch Due Diligence

Call 1: Introduce project steps and assess member fit.
Call 2: Gain executive buy-in for IT involvement in M&A due diligence.

Guided Implementation 2: Gather Information

Call 1: Determine the current state of the target organization.
Call 2: Consider the current state of your own organization.

Guided Implementation 3: Perform Analysis and Estimate Costs

Call 1: Define the resultant enterprise.
Call 2: Close gaps and estimate costs.

Authors

Amanda Robinson

Jason Petrovic

Contributors

Dave Spinelli, Senior Enterprise Architect, Microsoft Services
Bob Vukovic, Head of Technology, Direct Energy
Brenda Hobbs, Director, Records and Document Management, Barrick Gold Corporation
Jack Nestell, Owner, Nestell Consulting (M&A IT Advisory Services)
Roy Bartlett, IT Executive, Project Delivery and Data Centre Management, Novintro, Inc.
Vincent Briere, Director, Information Technology, SightLife