There is a masive drive to hire in IT skills to the Advisory teams within the Big 4 Consultancy firms
Preventing Merger Value Erosion
Over past M&A activity, a recent survey report I read stated that nearly 50% of senior executives said that more detailed IT due diligence could have prevented merger value erosion. Only one third of corporate transactions put an emphasis on IT but more worryingly nearly 20% of the survey recognised that dealing with IT had the most challenges post transaction.
The key red flag that came from this report was that during M&A transactions 80% of respondents largely engaged the Finance function followed by Legal then Operations but IT only came forth on the list at 50%.
Many Corporate Boards are found short on technology know-how during the M&A process as Boards make strategic Acquisition decisions in the ‘dark’ !
Businesses today are under more pressure than ever to deliver value to stakeholders, particularly when undertaking bold initiatives such as mergers, acquisitions or asset disposals. This is true not only for corporate acquirers but also for private equity (PE) firms, whose strategy is leaning toward add‑on acquisitions as a means of growing their portfolio companies.
Under the current economic conditions and the rising cost of debt, management teams will require additional effort in restructuring or streamlining operations of acquired businesses to deliver success in the absence of financial engineering. Information Technology (IT) is fast becoming a key lever which management can use to deliver operational benefits — whether in reducing operational costs, entering emerging markets or scaling their business across multiple geographic regions. With advances in technology and its impact on today’s business models, companies are increasingly pushing the boundaries to remain competitive. IT is one key area to do this — businesses need to view IT as an enabler rather than a cost center.
About this report: All of the strategic initiatives behind a transaction rely on IT. Businesses can no longer ignore IT or view it as a back-office function if they want to achieve maximum value. Ernst & Young have surveyed 220 senior corporate and private equity executives across Europe about the role of IT in the transaction process. E&Y aim was to uncover the common factors that help to drive deal success.