M&A IT due diligence insufficient

Companies engaging in mergers and acquisitions are not giving sufficient consideration to the IT concerns involved in such deals, according to a new report from financial advisory giant, Ernst & Young (EY).

The company questioned 220 senior corporate and private equity executives across Europe and found that only half of the respondents said they had made sure to carry out separate IT due diligence prior to their last deal.

Around 47 per cent admitted that, with hindsight, sufficient IT due diligence could have minimised subsequent “value erosion” in many of the deals they had been involved in.

Michael Driessen, a partner in the operational transaction services practice at EY explained that inadequate IT research and knowledge was becoming a blight on M&A deals, particularly as IT’s role in the modern corporate world is so indispensable.

“One of the most common issues we see in terms of transaction stresses is not involving IT early enough in the process,” Driessen said. “Our survey found that only 50 percent of respondents said they typically involve IT in the transaction process – compared to nearly 80 percent who involved the finance department.”

He said that strategic IT expertise had now become crucial on both sides of a transaction, and that “if this isn’t available on both sides of the fence in-house, it needs to be bought in”.

Also read: Intellectual Property in M&A – The key due diligence considerations

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