Tech Diligence is the concept of incorporating the tech ecosystem into your due diligence process.
Why would you want to do that?
Tech is, and will always be, a part of the integration process. Yet, there are two places where the tech side of the integration can make or break the merger, acquisition, divestiture activity:
- Misaligned timetables negotiated as a part of closing the deal impacting the various transition agreements as they go into effect.
- Over-spending (or under-spending) on the people and tools required to facilitate the apps and data being conveyed.
The first part goes against a hard timeline whether regulatory or negotiated access to facilitate conveying everything over. Usually with steep penalties or lengthy negotiations when you breach the terms. The second part will impact whatever costs or savings you are hoping to get post-acquisition. You might get away with some cost reductions through the fabled synergies, but do you know how much?
What can be done prior to close?
For strategic acquisitions, there will be a lot of commonality in the software stacks. Just taking that at face value ignores the complexity of the software and processes your firm bought. The data, while similar in nature, is not the same. Even when you are using the same vendor or similar products developed in-house.
While attempting to look into this prior to close, care must be taken given how close it touches to the core of each company’s business. The risk can be mitigated by using a trusted third-party to act as an arbitrator to provide the high-level details without revealing the trade secrets prior to close. Another approach would be to war game with your technical teams to identify the team’s strengths when facing certain scenarios.
While it won’t remove all of the surprises, it will reduce a large chunk of it.
Just remember, by the time the deal is closed, then it is too late.
What we do
Are you someone who is:
- About to undergo your first strategic merger, acquisition, or divestiture?
- Looking to help a portfolio company through their first strategic acquisition or did you just inherit a divested company?
We help M&A dealmakers and owners such as yourself to assess the tech implementing business systems and processes, and create plans that reduce tech risk, optimize tech synergies, and achieve M&A success. If this sounds like you, then reach out.