In the past decade, the financial industry as a whole has changed dramatically. This has been no exception for Private Equity firms, who traditionally have created the majority of their value through leverage and financial engineering. Both of these areas are still critical to the success of private equity firms, but Private Equity firms that stand out above the rest need to also drive significant value through bottom line efficiencies.
The benefits of combining IT and Operations in Due Diligence Assessments is that these two go hand-in-hand in the way that a modern company operates. Businesses today in every industry rely on technology to drive their processes forward. A deep, calculated dive into both the IT assets and operational processes of an organization can provide better insight into risks, issues, opportunities, and assets. To help understand more of why combining these two is critical, we have outlined some specific advantages a single, seamless IT and Operations Due Diligence Assessment can provide.
Benefits of Combining IT and Operations in Due Diligence Assessments
One, Unified IT and Operations Assessment
There are many risks associated with Transaction activity among businesses. Far too often, these little things that are overlooked are why transactions don’t live up to their expected result. Many of these challenges have their roots in the technology businesses operate on, but are overlooked during the initial assessments. Traditionally, it was not uncommon for the buyer to outsource an Operations Assessment to a specialized firm, who would either not understand the technology components of a business correctly, or they would isolate that part of the process off and outsource the IT Assessment to a third-party firm. Both of these approaches make it difficult for the buyer to get a holistic view of how the technology plays a role in the success of an organization. When you outsource these assessments to a firm who focuses on the IT and Operations portions equally, you are getting a better look at how to two interact together.
Identifying Adjustments That Positively Impact EBITDA
On both the buy-side and sell-side of the due diligence process, changes to potential EBITDA need to be calculated before a transactional activity. An IT an operational due diligence process can unlock potential risks and incompatibilities to various technology systems.
Uncovering Issues Before They Become Deal-killing Surprises
All too often, deals come apart before they are closed because of something that was overlooked in the past. Bringing in a third-party to do your IT and Operations Assessment adds credibility and objectivity to the process that ensures that value has been appropriately determined. What copyrighted materials and products is the company being purchased or divested? Have any exclusive technology licenses been granted to third parties? All of these questions need to be answered to avoid a potential problem coming up that would cause the transaction to fall apart.
Allowing Business Leaders to Stay Focused on Goals
Business transactions require a lot of planning and focus. By outsouring your IT and Operations Due Diligence processes to a trusted provider, your leadership can stay focused on all of the other pieces that need to be in just the right place in order for the transaction to be successful. Keeping these assessment processes in-house frequently leads to business leaders underestimating the level of internal staff and resource support needed for adequate data gathering analysis. It is easy for day-to-day responsibilities to fall to the way-side. Relieving stress on key personnel allows the management team to focus on what they need to in order to keep business operations flowing smoothly.
Are you considering or in the process of a M&A or Divestiture Transaction? Learn more about what Orion can do for your organization, Check out our Private Equity Solutions Page.