No Deal: How poor IT can send a buyer heading for the exit

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Mergers and acquisition deals are some of the most exciting and thought-provoking of all; they’re the end-game for many a business owner and the life-blood of serial investors.

According to ONS data, from April to June of this year, there were 155 mergers and acquisitions involving UK businesses, with a combined deal value in excess of £30bn. Interestingly, a number of deals completed in Q2 are down from 214 in the first quarter of the year (Jan-March), but the value of those deals are just over half, totalling £16.5bn.

With big money on the line, the prospect of a no deal is not what business owners have it mind. When it comes to valuing a business, many investors, advisers, purchasers and sellers often focus on profit, turnover and assets. However, according to one Caerphilly-based firm, often overlooked when it comes to valuing a business is the IT system that the business has in place.

“When it comes to buying or merging a business, due diligence is key,” says Mike Parfitt, Managing Director at Team Metalogic. “Finances and company processes are key to any deal, but what many fail to properly evaluate is the role of the IT system.”

Mr Parfitt argues that IT is as important as any business function other when it comes to operations; therefore, the due diligence needed on IT is essential in getting a good deal.

“Over the last 18 months alone we have worked on six mergers and acquisitions; on both behalfs of the seller and the purchaser. There are key issues that crop up time and time again. When it comes to acquisitions, the current IT infrastructure needs to be properly assessed to see if it’s fit for purpose and capable of supporting additional users and data post-acquisition.

“Simply acquiring an amount of users with a ton of data will only get you so far. If the foundations aren’t right, you’ll find that you have acquired an expensive headache, not just a business.”

Mr Parfitt continued: “When it comes to mergers, it is important to ascertain whether the businesses will continue to operate two operating software systems with regards to accounts, CRM, databases and sales support. It is important to question if they can integrate or be merged with the desired IT infrastructure.

“Businesses can experience buyers remorse with unexpected costs and system upgrades if they fail to properly evaluate the standard and flexibility of the existing IT infrastructure. Also, there can be further repercussions with unlicensed software; many businesses fail to legally license their software and Directors of the business can become personally liable.

“Properly analysing all aspects of the IT infrastructure as early as possible will ensure that the acquired or merged business can be seamlessly integrated and the new users effectively supported. We get involved right at the start of the acquisition process to ensure there are no surprises later.”

For more information regarding Team Metalogic, or for any advice on IT systems when it comes to mergers and acquisitions please call 0345 521 0618, email info@teammetalogic.com and follow @TeamMetalogic on Twitter.

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