As the due diligence planning starts off, buyers will typically scope out financial and tax, legal teams and commercial due diligence but rarely is tech included, despite the potential significance tech can have on any deal. Similarly post-acquisition plans rarely anticipate IT work streams beyond replacing the systems of one company with another. This ‘black box’ approach to tech in acquisitions can be extremely expensive, leading to significant unplanned post acquisition cost and delay. For example the listed international publisher who had to completely replace the platform content was hosted on and migrate it all, the inherent risk to loss of SEO capabilities. Or the listed e-commerce retailer that acquired bleeding edge technology because of its superior personalisation and analytics, only to have to migrate off that technology after the transaction. It is because the sponsors of due diligence feel so uncomfortable with tech that they struggle to articulate what is required and the assurance it can provide. It can be relatively straightforward to identify risks that may indicate a need for rework or investment, for example:
- Unclear ownership and alignment of key business processes that rely on tech, which can lead to a lack of alignment between tech and business requirements;
- Network tracking and monitoring (all have vulnerabilities and well informed teams can articulate the risks);
- Evidence of a tech deficit (an inability to assess a deficit can be a cause for concern in itself);
- Technology and product roadmaps; and
- Absence of tech governance, which can identify poor tech maturity and testing.
If a buyer needs to invest post-acquisition in tech to make it fit for purpose, they should question why they are paying a premium up front.
How we can help:We provide an integrated service so that we can apply deep tech understanding with corporate finance considerations. For more information, contact hello@linkstoneadvisory.com for a free and confidential initial consultation.
