How IT Due Diligence Can Mitigate Risk and Reduce Purchase Price of Acquisitions

In today’s highly regulated business environment, it’s harder than ever to get a clear and comprehensive view of the Total Cost of Ownership (TCO), and the risks associated with a potential acquisition.  A key contributor to this acquisition risk is overlooking IT infrastructure and Security issues, which often leads to unanticipated IT spend and possible regulatory compliance issues.

So, how do you understand the cost and risk involved with IT investments and possible regulatory or software compliance issues? 

Here are 5 Tips that will help:

1. IT Assessment Summary | Compliment the work performed by financial, legal, and operational analysts with an IT Assessment Summary that validates the TCO, analyzes risk and provides benchmarking information to make a more informed decision.
2. Take a holistic approach | Examine IT infrastructure and applications, IT security, service delivery and service support.  By scrutinizing all of these areas, the buyer can calculate the IT TCO and evaluate the IT organization’s efficiencies (or inefficiencies).
3. Leverage Proven Methodologies and Industry Benchmark Data | Map IT strengths, weaknesses and hidden deficiencies that can impact acquisition priorities.  This allows a buyer to better understand the current state of the target’s IT organization and help to identify and prioritize possible future IT investment requirements that may affect valuations.
4. Run a Security Risk Analysis|Compliment the IT assessment with a security risk analysis that provides a comprehensive evaluation of threats, vulnerabilities and impacts.  The objective is to understand the following:
   1. What are the critical information assets (data)?
   2. Where do these assets reside (systems)?
   3. How are they protected?
5. Create a Compliance Dashboard | Capture the compliance status of the IT organization for applicable regulatory requirements such as SOX, HIPPA, SAS-7-, etc.

By targeting areas often overlooked by financial, legal, and operational due diligence buyers can identify pitfalls that can affect purchase price or require a significant post-acquisition financial investment.

About the author:  Mr. Pollak is the Director of Business Development at Paranet, an IT consulting firm helping investors mitigate potential risks, reduce acquisition purchase price, integrate new acquisitions and migrate their IT environments quickly and seamlessly - with minimal impact to operations.