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Three IT Due Diligence Risks you Can't Afford [Part 2]

 

IT Due DiligenceLast week we talked about the compliance risks associated with Acquisitions and Mergers and how IT Due Diligence helps uncover those risks. At Paranet we believe some of the highest due diligence assessment priorities is the analysis of a company's IT systems and assets.

Just as a refresher, the risks inherent in the failure to conduct an IT due diligence investigation are:

  1. Compliance risks
  2. Inaccurate remediation costs
  3. Failed integration between the acquired and parent company 

Inaccurate Remediation Costs

Remediation cost assessment is necessary in order to determine the investment required to make a business solvent following an acquisition. It is not atypical for remediation costs to account for the majority of a parent company's expenditures following an acquisition. An investigation into the IT Department's remediation costs will allow you to determine 1) what the costs are and 2) if those costs are justifiable. 

As with failure to conduct a due diligence investigation, neglecting to assess remediation costs of a prospective company's IT Department leaves you, as a potential buyer, in the dark. Not understanding the remediation costs of a company's IT Department prior to purchase has potentially disastrous financial implications.  

Next week we’ll be talking about the Integration Failure Risk associated with not performing IT Due Diligence.

it-due-diligence-checklist

 

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