Research from accountancy giant Ernst & Young shows that not including technology in pre-deal considerations can lead to a loss in value.
The role of information technology (IT) in the process of mergers and acquisitions is not being given sufficient consideration, new research shows.
In a survey of 220 senior corporate and private equity executives by accountancy firm Ernst & Young, only half of all respondents conducted separate pre-deal IT diligence for their last deal, while 21 per cent of corporate individuals and 11 per cent of private equity respondents include technology-related considerations in transaction negotiations.
Further findings reveal that 47 per cent admit that in retrospect a more detailed approach to IT due diligence would mean less value erosion in the long term.
Michel Driessen, partner in the Operational Transaction Services practice at Ernst & Young, comments, ‘Technology needs to have a seat at the M&A table in order to deliver real value. One of the most common issues we see in terms of transaction stresses is not involving IT early enough in the process.’
Driessen says that the 50 per cent figure recorded for those who involve IT in the transaction process compares with 80 per cent who involve the finance department.
He adds, ‘A significant minority of those surveyed reported inaccurate cost estimates and timescales as a result of not recognising technology’s role in the M&A process early enough.’
The survey shows that 48 per cent of those questioned engaged third part advisers for the pre-deal IT due diligence, while 55 per cent did in the post-transaction phase.