M&A Due Diligence: you never get to ask all the questions you want to
Due Diligence
Due Diligence is a key step in any potential acquisition.
You need to find out as much as you need to, to be able to make an informed decision about whether (or not) to purchase a business, and as much as you can to validate assumptions you have made about the costs, benefits and timescales of doing so.
Good due diligence will increase the likelihood of achieving your target outcome.
Once Due Diligence starts, you are on the clock and subject to the process and information determined by the seller.
But you never get to ask (or get answers for) all the questions you have.
Technology’s Role
And whilst the Technology position is a key part of the overall cost and deal valuation, questions from other areas, particularly, Sales, Marketing and Finance are likely to take precedence over those from the Technology team.
As a Technology leader, to ensure you have the critical information you need, you need to be ruthless about the questions that absolutely need answers – and fight for them to be included.
It’s about red flags and costs
Using information provided by the seller and carefully considered questions, you need to identify
Potential red flags – particularly those relating to possible or actual data breaches and cyber / security exposure and potential compliance issues – for example, in relation to licence coverage. Often these won’t be decisive in whether or not to proceed with a bid, but they are essential to ensure the risk of doing so is understood
Potential risks to the operation of the business on day 1 – in particular, any restrictions with regard to novation or change of control of contracts, services or technology, and the likely retention of key capability (in-house or external) to run and support the technology platform. What else do you need to put in place to ensure no adverse impact on sales or service.
Expected costs – one off at deal completion and related to required integration and ongoing to run before during and after integration.
Each of these areas will be influenced by the key drivers for the acquisition, the type and scale of the acquisition itself and the underlying business and technology strategies which will guide the acquired business post deal completion.
Need Some Help?
Mergers and acquisitions are rarely part of everyday business as usual.
Talk to CXO Connect about the support we provide for due diligence and all other aspects of the acquisition process.