Bring in IT nous for M&As, executives told
IT considerations are not given adequate attention or rigour in the due diligence prior to mergers and acquisitions, a new report from Ernst & Young reveals.
Having surveyed 220 senior corporate and private equity executives, the accountancy firm found that only half the respondents ran pre-deal IT diligence for their last transaction.
Only 21% of the corporate respondents and 11% of the PE respondents said that they included technology-related considerations in their transaction negotiations.
“Failing to make provisions for the IT challenges associate with successful M&A can lead to value erosion or, indeed, deal failure,” E&Y said.
Evidencing the claim, the firm found that almost half (47%) of those surveyed said that, in retrospect, more detailed IT due diligence could have prevented such value erosion.
Moreover, IT can be a key vehicle for growth and value creation if used effectively in transactions, particularly where it is considered “early” in the merger or acquisition.
Michel Driessen, operational transaction services partner at Ernst &Young, also underlined the potential role that contract and other external IT professionals can play, where technology nous is lacking internally.
“Strategic IT expertise is now central to delivering a deal - and if this isn't available on both sides of the fence in-house, it needs to be bought in,” he said.
“It's about connecting IT issues to the strategic motivation for the deal. If IT is included in the due diligence stage, it can help a deal move from integration to innovation.”
According to the survey, business continuity from the deal’s outset and data migration issues are the major challenges, both of which require “honestly assessing the [IT] skills needed to make that journey.”