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Harnessing Digital Technology To Mitigate Risk in M&A

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IT Advisory / M&A / Private Equity

Harnessing Digital Technology To Mitigate Risk in M&A

Due to the pandemic, companies that once mapped digital strategy in one- to three-year phases must now scale their initiatives in a matter of days or weeks. 

Digital technology has emerged as the clear winner for companies to recover, build resiliency and find opportunities for growth. Now more than ever technology is front and center in M&A in understanding risk and in optimizing operations and returns.

Due diligence in the M&A process frames the potential transaction by carefully delineating the deal rationale and identifying the major sources of value and risk. When assessing digital value, it is essential to understand and quantify the skills, capabilities, and technology at stake and how they would fit into the combined organization. 

Along with technology value, acquirers must also identify the potential technology risks as they conduct their due diligence.

Some businesses carry risk in the form of large-scale IT projects that have capital funding committed for years into the future. Not only should a potential acquirer evaluate the business case for these projects, but it should also evaluate the ability of the company to deliver against the plan. Savvy acquirers have increased the role of their digital and IT leaders in all aspects of the acquisition process to help them identify and assess a target’s digital capabilities. 

Having identified the digital value that underpins the merger, companies now need to develop a strategy for integration planning and execution that will enable them to deliver the value they’ve committed to. To do this, integration leaders must build out a technology-integration road map, or technology blueprint, that realizes the full value while minimizing risks. A technology blueprint specifies the design of the integrated company’s systems, data, and processes, just as an organization chart specifies the company’s structure.

With M&A, most of the technology blueprint will be concerned with cross-functional core systems such as ERP, CRM and employee management.

While delivering on the deal rationale is critical, most of the technology blueprint will be concerned with cross-functional core systems such as ERP, CRM, and employee management, since they typically support a large majority of business activities and account for most of the technology value.

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