Even when this benefit side is examined the discussion usually remains focused on operational issues such as technical infrastructure and license re-negotiation options. The much larger benefit arising from alignment of the IT operation to true business needs is overlooked. This IT to business alignment examines the current manner in which IT operates and delivers its services, such as bespoke software development versus package solution deployment, and determines how well the chosen approach supports the key value-generating processes of the business. Correcting any misalignment will have a large impact on the ability to truly support the needs of the business and thereby increase ROI post merger or acquisition.

Understanding the correct alignment requires a focused effort and is an integral element of our IT due diligence framework, which ensures that both the correct depth and breadth of due diligence is undertaken and that both the IT risks and potential benefits are clearly identified.

Business leaders with an eye to acquisition should treat this as a major concern.  Hidden post-deal integration costs can be enormous and can easily destroy any hoped for commercial advantages, potentially leading to reduced market value, compromised business processes, damaged customer confidence, revenue loss and a demoralised workforce.  Good IT due diligence carried out at an early phase in the acquisition process can repay its cost many times over.  So why is the record in this area so poor and why isn’t IT due diligence as much a standard part of the M&A process as its financial and legal counterparts?

The answer to this may lie partly in the very nature of IT itself.  Firstly most business leaders are still not IT-savvy, preferring to think of it as a necessary cost rather than a valuable source of business enablement and innovation.  Consequently they focus on the financial and legal aspects of the transaction while assuming the technology will be sorted out later by someone else.

Secondly, IT is complicated, especially where it has grown and evolved with the enterprise over many years.   Operational issues and workarounds that may prove critical in the post-acquisition environment may be hidden deep within the technology infrastructure, well out of sight of those in the business who should be concerned about them.

Thirdly, it remains a sad fact that many CIOs maintain an essentially technical and operational mindset, preferring to focus on keeping the lights on rather than acting as a strategic support to their business counterparts.  In this way IT tends to remain as something “apart” and not fully integrated into the commercial thinking that drives M&A transactions.

It’s not all bad news however.  A new generation of business leaders are emerging who have grown up with high expectations of technology and who often have a good native appreciation of what emergent technologies are capable of providing.  Such leaders are beginning to assume CIO roles, combining both business and technical understanding and an appreciation of how technology actually contributes to business value generation.

Perhaps we will yet see IT due diligence take its proper and necessary place within the M&A process.  It will not be before time.

However, it does help to have a plan for how IT due diligence should be undertaken. We split our plan into two complementary components; a process and a framework, The Process defines and drives the work as a series of activities and the framework structures the output of these activities.

We have found that a framework that takes as its focus the information/data that the organisation’s IT edifice is charged with maintaining offers the best perspective on which to build a strong IT due diligence report.

To this core we have added a set of interlocking views covering, process, people and technology that collectively provide complete coverage of the IT related issues, risks and opportunities. These views provide a different perspective into the IT world and allow cross-checking to be performed to highlight areas of disagreement.

Without a clear framework an IT due diligence activity becomes a random collection of interviews and ad-hoc investigations lacking clear rationale and the ability to cross-check information for completeness.