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Private Equity IT Due Diligence Checklist

By: MaryBeth Hamilton

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Technology is the backbone of today’s organizations and when implemented along best practices it can deliver a competitive advantage and create value. However, an organization’s technology strategy, or lack thereof, can also introduce significant risk and future unforeseen costs making private equity IT due diligence critical.

This dynamic of risk or reward has put technical due diligence rightly in the private equity M&A due diligence process. While private equity IT due diligence begins pre-acquisition, planning early for post-acquisition technology strategy integration brings agility and speeds value creation. In this article we look at the information to gather and evaluate both pre- and post-acquisition.

Pre-Acquisition Private Equity IT Due Diligence

Properly evaluating the health and security of today’s complex IT environments requires a multifaceted approach to data gathering and analysis. It starts with understanding the business strategy, process, and technology by:

  • Identifying key business process and their interaction with technology
  • Identifying any technological dependence and associated business risks
  • Identifying any vendors and contracts currently in place

IT Operations & Management

  • What are the defined and in place IT organization structure, roles, and responsibilities?
  • Current IT support model(s): Are they up to industry standards
  • IT Service management framework, tools, and technology: What is the maturity level?

Information Security / Cybersecurity

  • What is the current IT security posture including and defined programs, policies, and procedures
  • What compliance requirements does the business have and are they adhered to? Providing examples of audit evidence and/or remediation activities.
  • What security technologies are deployed, and do they align to a layered defense strategy?
    • Multi-factor Authentication (MFA)?
    • Next-gen endpoint protection (EDR)
    • Managed detection and response (MDR)
    • Penetration testing and Vulnerability Assessments
    • Employee training and security testing
  • Have they experienced a security breach? If so, provide a copy of the remediation report.

IT Governance, Risk and Compliance

  • Collect core IT Governance policies, procedures, and documentation (including any data governance / protection policies / procedures)
  • Collect corporate / IT Risk management policies, procedures, and documentation
  • Review IT Financial controls including IT budgeting and spend
  • Review Disaster Recovery and /or Business Continuity policies, and procedures and recovery measures

IT Infrastructure & Systems

  • Can the existing infrastructure continue to support the business or are upgrades/migrations required for future growth? This question should be adapted based on the acquirer’s plans for the business
  • (platform, add-on, standalone, etc).
  • Are the applications most critical to the business appropriate secured and protected?
  • What role do cloud-based services (SaaS, PaaS, IaaS) play in the company’s IT environment?
  • What remote access methods for externally accessible network resources are in place and how are they secured?

Infrastructure & IT Valuation

Assess the foundational elements of the business’ information technology

  • List all infrastructure-related items that are relevant to the organization.
  • Identify the total costs/value of each item, including if high-cost items will require replacement in next 12-months.
  • Calculate the total cost/value of your IT infrastructure by adding all of values

Once the deal is done, it is on to the post-acquisition IT integration. Read our full Private Equity IT Due Diligence Guide for recommendations on ensuring a smooth integration or watch our recent web event on Strategies to Master System Integration & Speed Value Creation below.

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