A Critical Oversight During A Company’s Merger and Acquisition Proceedings

A Critical Oversight During A Company’s Merger and Acquisition Proceedings

An important consideration when merging two companies that often receives insufficient attention is a review of how information is managed by both firms. Not a review of the IT infrastructure itself, but rather a close examination of how the most valuable, sensitive data residing on a company’s infrastructure is handled. If overlooked, the risk of a bad deal during the merger and acquisition increases, especially in today’s data-driven business world.

Since information now underlies so many facets of how a manufacturer operates and what its value is, a careful assessment of another company’s systems can be as important as the financial, tax, employment and other diligence done during merger and acquisition proceedings. It is not something that should receive short-cut treatment. Successful mergers almost always include allocating enough time before a purchase is finalized to establish at least a preliminary plan for how the two organizations will combine and manage their collective data.

Neglecting to examine details of the information platforms used to run both companies’ operations can result in some shocking (and expensive) discoveries after a merger is finalized. The reason for this “false positive” typically comes down to an incomplete understanding of how these respective systems have been designed and implemented. Among other things, it will frequently lead to incorrect assumptions about the accuracy of the information produced. Too often, this data is far from accurate.

Integrating disparate information systems is a big challenge, made harder when objectivity and technical knowledge are lacking. Therefore, it can be beneficial to call in a third party that understands what documentation to review, who to interview and how to interview them, and how to interpret and evaluate the information provided. This 2nd set of eyes should especially be considered when one or more of the following conditions exist:

  • Limited in-house expertise to analyze how effectively each companies critical data is being managed and protected
  • Enough complexity in the combined technology environments to warrant cross-disciplinary expertise
  • Potential conflicts of interest that need to be avoided
  • Presence of sophisticated technology issues which need to be explained in plain language to senior management and M&A advisors
  • Desire to take the opportunity during due diligence to establish a preliminary technology plan for the merged organization

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