The role of IT in mergers and acquisitions

When organizations acquire or merge with another company, it is critical that they make informed decisions that will determine the level of success or failure of the venture. Information technology departments have always played an important role in M&A activity. The IT department of the acquiring company must assist in the assessment of the other company’s IT Assets, evaluating its IT operations and the accuracy of financial reporting relating to IT.

The company being acquired will have devices running in operations that must continue to deliver their services throughout the acquisition process. All devices must be fully integrated into the post-acquisition operational environment and maintained by the existing staff. It’s important to account fully for these devices details and ensure they are understood from both operational and inventory perspectives. Acquired technologies that are in conflict with the strategic direction of the current infrastructure might need to be replaced or factored into a revised strategic direction and should be considered as part of the due diligence process.

In parallel to evaluating and inventorying the Assets, IT should also evaluate the details of the operations at the company being acquired. Support structures, operating metrics, service level agreements, monitoring thresholds and security vulnerabilities, as well as all other decisions, tasks and actions that occur daily must be carefully documented and reviewed. The operational procedures then must be compared to the existing ones to determine if they should be adopted, replaced or coalesced.

Generally, companies acquire or merge for financial growth, but that’s not always the end result. The realization of growth is dependent upon the ability to report fully all of the financial aspects of the company being acquired. That requires IT to produce accurate reports on the cost of IT operations as well as other areas of the target company.  Infrastructure or IT Asset data must be accurate and complete before being assessed. The assessments must be comprehensive and up-to-date to be useful to mitigate risks and avoid surprises as a result of bad information. The collected data must instill a high level of confidence for leadership to make decisions. Otherwise, the M&A will fail or force leadership to reconsider its decision.

IT is a vital player in the successful execution of the acquisition of another company. It must produce all of the necessary data and provide insight into how that organization truly operates. Understanding this is important during due diligence because it helps to avoid risk and contributes to the overall valuation.

There are notable risks with any M&A if the information needed for the due diligence process is not accurate or not accessible. An accurate valuation and successful execution depend on these findings and will be a major factor in how or if the company proceeds with the acquisition.

The role of IT is to collect, consolidate and present the gathered facts to leadership, so it has a comprehensive overview of the target company to minimize risk and to make an informed decision on the proposed acquisition.