IT Due Diligence Services

Current state due diligence and value enhancing opportunities that improve ROI
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IT represents a key component of target company value, potential and risk.

As private equity investors evaluate target acquisitions, IT due diligence provides an evaluation of how well a target’s IT investment is utilized as a strategic capability. IT performance is a key indicator of business value and a driver of the broader organization, and is critical to understanding risks, capabilities and maturity.

Our two-step approach:
  1. 1. Current state diligence: Assess the IT state of the target across multiple dimensions including footprint, commitments, risks, processes, people, security, scalability and integration strategy.
  2. 2. Future state opportunities: Advise strategies for IT optimization, synergies, leverage and cost savings to enhance the value of the acquisition.

Current State Assessment

The outcome of a current state assessment is to provide an in-depth understanding of a target’s IT function and its contribution to the value and risk profile of the target organization.

1. Assets and commitments: Visibility into Position, Forecasting and Planning

  • What assets does the target currently own or license? What is deployed?
  • What are the asset values, contractual arrangements, annual IT spend and depreciation schedules?
  • Are there audit license risks from over-deployment or financial costs from under-deployment?
  • What future purchase commitments and obligations are in place?
  • What IT projects are in progress and planned?
  • Where do additional IT investments need to be made?

2. Strategy

  • How has IT been managed as a strategic asset?
  • How do the target’s KPIs benchmark against peers?
  • How does IT enable business strategy? Is the target company utilizing capabilities and solutions to the fullest potential?
  • Were appropriate IT investments made? Is IT ahead of business demand? How involved is IT in driving business strategy to create value?
  • Are applications that support critical business functions scalable with planned growth? Are they stable and reliable?
  • Who are competitors?
  • What is the level and quality of integration of historically acquired businesses?

3. Processes

  • Business processes and application architecture review: Are processes effective and efficient?
  • Does IT produce high-quality data that provides indicators of the customer experience, operational performance and key metrics?
  • Infrastructure, application and data reliability and scalability – what has outage history been?

4. Cybersecurity and Operational Continuity

  • What are the critical exposures to security threats? What cybersecurity resources, processes and tools are in place?
  • Do they have a strategy in place to protect critical processes and IP?
  • Does the team include members with certifications?
  • Are there plans in place to help detect, respond to and recover from security incidents?
  • How robust are protection policies and is data encryption required?
  • Are there tools and methods in place to prevent and detect insider and external threats?
  • Do they have documented disaster response and recovery processes?
  • What is the risk profile of the technology infrastructure?

5. ERP Effectiveness Health Check

  • Are applications supporting, or interfering with service operations and delivery?
  • Can the target’s ERP support an integration, post-close? How will the acquired IT infrastructure integrate?
  • Are ERP solutions standardized across business units and scalable for growth?

6. Data Management

  • How does the target manage sensitive customer and employee data?
  • Where is data stored? Where is the most critical digital intellectual property stored?
  • Has master data cleansing been initiated?
  • What data is sensitive?
  • How frequently are backups conducted?
  • Are there regulatory compliance requirements?

7. Strength of IT Leadership & Team

  • Executive leadership and staff capabilities – Does leadership drive change?
  • Governance and risk management effectiveness
  • Does management have the capability to effectively manage IT costs and planned investments?
  • Do they work together in a collaborative manner?
  • Is the team right sized for effectiveness?
  • Do they select solutions that are aligned with the broader IT strategy and track progress against value-based KPIs?

Future State Opportunities

The value enhancement assessment provides insight into opportunities to increase the return on investment through IT leverage and strategy.

1. Streamlining and Rightsizing

  • Quantify the opportunities to right-size the footprint and simplify the environment

2. Vendor Strategy and Enterprise Agreement Consolidation

  • Would the acquisition lead to deeper discounts attributable to a higher tier of purchase across a consolidated organization?
  • Are there opportunities to combine applications to a single vendor to reduce the number of vendors and increase leverage?

3. Contract standardization

  • Can processes be streamlined by standardizing agreement terms?
  • Are there opportunities to co-term agreements?

4. Forecasting

  • Future-case spend projection

Connect with us Engagement Models

Partnering with BLC puts your resources to their highest use: Your teams stay focused on mission-based, profitable and strategic initiatives while we focus on savings. Those savings can then be directed to priorities within IT, organizationally, or to the bottom line.

Maximizing value is all we do: We review and negotiate hundreds of license and maintenance agreements, true-ups, audits and proposals annually. Individual organizations manage these events as they arise - we see them every day.

Broad insight: Our clients span a wide range of industries including healthcare, insurance, education, banking, logistics and retail. With over a decade of experience, we have insight into best-in-class agreements, arrangements and solutions to position IT as a value-driving entity.