IT considerations are not given adequate attention in the due diligence prior to mergers and acquisitions, according to research from Ernst & Young.
As a result, said E&Y, deals can lead to problems further down the line. E&Y questioned 220 senior corporate and private equity executives across Europe and found that only half the respondents conducted separate pre-deal IT diligence for their last transaction.
In addition only 21% of corporate and 11% PE respondents included technology-related considerations into their transaction negotiations.
In the survey, 47% said that in retrospect more detailed IT due diligence could have prevented "value erosion" in past deals. E&Y said IT can "be a key vehicle for growth and value creation if leveraged effectively in transactions".
Michel Driessen, partner in the operational transaction services practice at E&Y, said: "One of the most common issues we see in terms of transaction stresses is not involving IT early enough in the process. Our survey found that only 50% of respondents said they typically involve IT in the transaction process – compared to nearly 80% who involved the finance department."
Driessen said strategic IT expertise is now central to delivering a deal and "if this isn’t available on both sides of the fence in-house, it needs to be bought in".
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