M&A Due Diligence: Are You Preparing for an Acquisition? Don’t Forget About Your IT

Being at one of the leading IT services firms in Boston, Cambridge and the greater New England area, one of the major things that excites me every day is the fact that we often find ourselves in the epicenter of biotech and pharma innovation in the modern era. In addition to helping break new ground in terms of healthcare technology, that also means that we often find ourselves dealing with IT’s impact on the business-side of things – IPOs, acquisitions and compliance.

Over the last couple years, we’ve helped clients prepare for acquisitions, address their compliance requirements and ensure they can adhere to customer expectations for maintaining the integrity of their data. To say that addressing any of these initiatives is a stressful endeavor for everyone involved is somewhat of an understatement, so when a transition materializes successfully or proficiently, it’s something we’re very proud of.

Having been through the process enough times myself, there’s a pattern that I’ve seen emerging that I think is absolutely worth addressing. Oftentimes high tech and high growth companies, notably in the fast growing New England market, are in such an aggressive growth mode that everything else falls by the wayside.

They’re so focused on the bigger picture that they lose track of what is right in front of them – things like compliance, IT and even security – until it comes time that they are looking to get acquired, which coincidentally, is when all of these things “suddenly” become important.

But when you’re in an IPO situation and you’re dealing with Sarbanes–Oxley compliance and audits from the IPO underwriters, or when you’re going through the due diligence of the acquiring party in a private stock or asset sale, this is maybe the worst possible time for all of this to suddenly come into focus.

It’s a stress that a lot of organizations deal with, but the fact of the matter is that they don’t have to. If they have the resources and consultative foresight to have planned for these things all along, and incorporated them into their greater IT strategy, then IPOs, acquisitions and compliance are things that can rather seemlessly fall into place.

Tomorrow’s Success Comes From Today’s Action

The fact of the matter is that high growth startups and businesses with an intent of getting acquired from the get-go need to also have the mindset that IT is no longer the afterthought that it once was. They need to adopt a new cultural model – taking IT from the backroom server to the boardroom and everywhere in between – because it’s not just absolutely critical for things like an upcoming IPO/acquisition- but as a means of better controlling expenditures, forecasting both IT and non IT resources, minimizing exposure to growing cyber threats and maintaining the optimal productivity of your end user/employee environment. Technology is constantly changing and businesses that want to thrive within this new, sometimes volatile technological landscape will need to recognize this as the new reality and allocate more resources than before to make the most of these changes.

When we help our clients prepare for their own upcoming acquisitions, one of the first things we do involves partnering with their existing leadership- on both the IT and executive levels- to identify and address any gaps in their plan that may exist. We take a look at everything – from state and local compliance to their specific industry compliance standards and lest overlooked, the compliance standards of the acquiring party. We start with an in-depth analysis of which standards we need to meet and then we audit anything and everything to find those gaps and fill them as soon as possible.

Another one of the reasons why it’s so important to think about all this as early in the process as possible is that two very different systems – and processes- are about to become one as soon as the agreement is signed. According to one recent study, speaking to this point, indicated that about 75% of mergers and acquisitions ultimately fail to meet short term expectations. Much of this has to do with the approach of merging supporting systems like back office systems, billing systems and the like, and then consolidating IT platforms later on. If that sounds like people are still treating IT like an afterthought, it’s because they are. If they didn’t, you can bet that number would be a lot lower than it actually is.

Why, then, does it make any sense to ignore IT now, at this crucial moment where everything is about to change? Once again, the answer is simple. It doesn’t.

One of our clients was just acquired in the last few weeks – a deal to the tune of about $25 million, give or take. During the acquisition process, they didn’t have to worry about IT holding up the deal or how it would impact them moving forward. The IT side of the deal went smoothly because all of these things had long since been taken care of due to their holistic approach of incorporating the IT strategy with their evolving business objectives, combined with our consultative and collaborative approach.

We’re very excited to enter into the next phase of partnership with that particular client – something that is only possible because of their cultural perception of IT and the important role in the accomplishment of their current and longer term objectives.

If you’re interested in finding out more information about how to get your IT up to speed when it comes time for your acquisition or IPO, or if you’d just like to discuss your own cultural mindset to IT with someone in a little more detail, don’t delay – contact one of our friendly technology experts at TSI today.