The Cayfour team has participated in 15 mergers and acquisitions throughout our careers – at times as the buying company, sometimes as the selling entity, and often as the directors of the IT divisions. Since IT can represent the largest capital and operational expenditure in an M&A, a due diligence assessment can be a game changer. Buyers want assurances that they’re investing in sound IT personnel, products and processes and that there are no hidden capital costs or liabilities lurking around the corner. Sellers need to understand the impact of the IT resources on the value of the sale, as well as gain an understanding what integration will entail.
We take a comprehensive approach to due diligence, focusing in these areas:
- What infrastructure (e.g., data center, networks, servers, monitoring) is in place and how robust is it, particularly as it relates to service reliability?
- What leases or contracts are on the books? Who are the service vendors?
- What is the expected capital investment needed to maintain or improve systems?
- How does overall IT spending compare with others in this industry? Should the company be spending more on IT? Less?
Hardware & Systems Assessment
- What applications (e.g., CRM, accounting, POS, computers) are being used and how current are they? Are they for future growth?
- What technology licenses does the company have and how critical are they to the company’s business? What type of support comes with them? Are the systems secure?
- What is the replacement cycle and/or what is the expected capital required to bring them current?
- Is the right mix of staffing in place given the organization's current and future objectives? How does the IT headcount compare to other organizations in the industry?
- Does personnel have the right skills sets, knowledge, certifications and/or experience to meet the organization’s needs?
- What new initiatives are underway and what implications does that have on staffing and other resources?
IT Process Evaluation
- What security measures are in place, across systems (e.g., data center, staff training, firewalls)?
- Is there a disaster recovery plan in place?
- What are the processes for application development, change management or IT operations?
- What IT management best practices need to be added?
- How can you best avoid operational disruptions during the IT integration phase?
- Should any systems or functions be outsourced? Can other functions that are outsourced be brought back internally?
Cost Savings & Improvements
- Where do operational synergies reside, if any?
- Where are there opportunities to improve business performance and reduce costs through better use of IT resources?
- What type of IT architecture planning has been done, if any?
- What integration will be necessary, how long will the process take, and how much will it cost?
- What’s the market value of any liquidated IT assets?
- What telecom, Internet, utility or other service contracts are in place? Are rates competitive? Are they being fully utilized?