Improving quality and significance of IT Due Diligence at M&A transactions
By Jim Hoffman
Typically, during the IT due diligence process, there will be a period of communication via phone and email where initial questions are asked and preliminary information is requested. This will usually be followed by an on-site visit.
Prior to the onsite visit, it’s important to perform independent research on the potential acquisition. The Internet offers a number of excellent opportunities to perform this research. This article describes a number of resources that can be very useful during this phase of IT due diligence.
The Target Company’s Website
The first place to start is the target company’s own website. Try to identify the company’s product offerings and the executive team. Note anyone involved in technology such as the CTO or CIO. You can also look for press releases and other company background information.
LinkedIn can show you the backgrounds of current employees. Through LinkedIn connections you may identify people you have in common with key target company staff members. This can provide a conversation starter during your in-person interviews and also give you a potential reference to check. In addition, if there are a lot of LinkedIn members who formerly worked at the target company, this might be an indication of high turnover.
An additional resource for German speaking countries could be Xing.com
Many companies promote their products or technology via YouTube videos. By viewing these videos, you can get a basic understanding of the company’s offerings, and more efficiently utilize the onsite visit to get into a greater level of technical detail.
The website stackoverflow.com, a popular software developer forum, may be able to give you some insight into the company’s technology and the staff’s skill set. If you have a list of the target company’s software developers, you can search for their names on stackoverflow and potentially see the types of questions they’re asking in the website’s forums. You may be able to gauge the staff’s proficiency with particular technologies and identify via the questions asked any struggles being encountered by the development team.
An additional resource for German speaking countries could be codekicker.de
glassdoor is a company review site. If the target company has reviews on the site, you can see what actual employees think of the current environment and management. While the negative reviews often outweigh the positive ones for most companies, and the site should be viewed with this in mind, company reviews on glassdoor can give you some starting points in your conversations with the target company’s staff when you’re trying to identify key employees and potential flight risks.
An additional resource for German speaking countries could be kununu.com
Is the target company hiring? By looking at job descriptions on hiring websites such as Monster.com and CareerBuilder, you can get an idea of the technology being utilized and how many open positions may exist on the IT team. You can also look for a career page on the company’s website.
If the acquiring company has access to a resume database like Monster.com (the employer version, which allows you to see information on candidates actively seeking jobs) you can search for employees of the target company. If a large number are in the job market, it can be a significant concern and threaten the success of the transaction and integration.
By utilizing the Internet to perform some relatively simple research prior to the site visit, you can often gain a surprisingly detailed amount of information about a potential acquisition before you even walk through the door. Armed with this information, you can make the time spent onsite even more valuable, and in the end perform a much more thorough examination of the company during IT due diligence.
About the Author
Jim Hoffman is the Chief Operating Officer of BESLER Consulting, a financial, operations and IT consultancy to the healthcare industry in Princeton, New Jersey, USA. He has led numerous IT due diligence efforts during his career. He is the author of the IT Due Diligence Guide. More information is available at http://www.ITDueDiligenceGuide.com