Due Diligence CPC

I’ve had the pleasure and displeasure of being involved in several acquisitions and each one is always a little different.

At the end of the day though there are tried-and-true methodologies for acquiring a business.

So as the story goes my company is in the process of acquiring another IT company.

We’ve already gone through the initial courting phase, discussed the initial Terms and Conditions and signed a Letter of Intent (LOI) to move forward based on those T’s and C’s.

Our next step is due diligence which is basically figuring out what we signed up for and coming up with a plan to integrate this newly acquired company.

So here we go.

The first three things you’ll want to look at when doing due diligence on an IT company are the following.

Contracts
People
Collateral
 

Contracts - While we already have a general scope of the contracts for earlier reviews - during the due diligence phase we’ll want to understand the ins and outs of the contracts we’re acquiring. This includes things like start dates, terms of contracts, products and services included as well as any special contractual items.  We’ll then take this information and input it into a model.

People - The next thing we’ll look at look at are people. Since the people are a key ingredient of a service business we will need to meet the staff and assess how they fit from a cultural, technical and resource need perspective.  We’ll then take this information and input it into our current staffing model.  Note, sometimes this can be an issue if the seller has not communicated the sale to their staff.

Collateral - The third are we’ll need to look at is collateral - which is defined as documentation, line of business applications and processes.  Basically the information base the company uses to operate.  We’ll then take this information and map it to our operations model. This helps with translations and migration.


Once we have all of these inputs we’ll begin creating the outputs.

Outputs being defined as - actionable documentation used in our implementation plan.

Sure there are all other sorts of parts and pieces that go into the due diligence process.

For some of those we’ve partnered with an M&A company to handle the financial and legal transaction pieces.
 

But still, at the core of any business are - contracts people and collateral.

If those three things aren’t there.

Then you’re really not acquiring much.

So off I go, wish me luck.