We know that deals are expensive and that the synergy value often does not overcome the cost of the deal. We also know that diligence is one way to beat the odds and provides the best insight into a transaction. IT costs often get out of hand and are a significant contributor to the erosion of value.
If financial, tax and legal diligence are realities; why aren’t IT diligence? The deals I’ve been involved with touch upon IT though not sufficiently. The focus seems to be on where the IT systems may be similar and less so on how difficult and a reasonably accurate estimation. Why is that? Anyone have any insight?
I would offer that the problem in your instance is the age-old issue of IT not being aligned with the business. Consider that when IT is used only to automate functions and maintain information then IT due diligence into the target company many only include the cost of migrating the acquired company to the systems currently in use at the acquiring company. Budget and level of effort for system conversion are often defined and considered when it comes to migration but defined synergies beyond simple cost savings for automation are not considered. In short, the acquiring company may not be using IT as part of its business strategy, unless of course the entities are tech companies like Polycom.
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