Article

Why do I need to be bothered about technology in my deal?

We give our opinion on the four reasons technology, and systems, should not be overlooked.

In this article, we give our 'top tips' on key technology areas to concentrate on when considering a deal, and take a look at the things to consider before you get close to putting pen to paper on a deal.

1. Often, the technology IS the business

From utilities trading to market research and from product-led companies to technology consulting, technology is often the fundamental driver of the business. If products aren’t secure and robust, or won’t scale, that kills the value in the deal. Equally, technology often forms a critical part of the product supply chain or value (consider an online retailer with a warehouse full of stock but a non-functional website). Also, increasingly, customers rely on it after purchase (a satnav with no ‘sat’ isn’t much good at ‘nav’).

In these situations, investment in any deal must be seen as firstly an investment in the technology platforms the business exploits.

2. Even in conventional firms, bad technology can break your business

Taking that retail example again, a more traditional multi-channel retailer still relies on its technology and systems; regardless of whether it still displays goods in bricks and mortar stores. Without technology, the tills don’t work. Without technology, the call centre can’t take telephone orders. Without technology, most businesses can’t scale – and without the ability to scale, where’s the value in the deal?

3. There are financial benefits and penalties

Great technology is an enabler to great business. It opens up new markets, and allows new products to be developed. Unfortunately, the opposite is also true. Bad technology hampers a business, reduces profitability, and can mean products and services get left behind in today’s connected world. Buy into a business with great technology and you buy in to the future. Ignore bad technology at your peril, and buy in to the past.

4. Technology is often overlooked in other due diligence

Financial and legal specialists may not understand how the technology in a business is reflected in the P&L. In a recent deal, Waterstons worked with the principals to gain a much better understanding of both one-off and continuing costs, which were not clearly expressed in the deal papers beforehand. This allowed for a very significant price reduction – technology in its own right may not seem expensive in the context of the hundreds of millions exchanging hands, but the way it is used certainly is. A great system badly implemented or badly maintained is a disaster waiting to happen – if it hasn’t already. That potential IPR lawsuit the legal team spots is no more important than the ineffective business continuity plan that a well-executed IT due diligence process will identify. If the business fails because of a factory fire, does it matter if it gets sued?

To read the other articles in the series, follow the links below:

Article 2 - IT in Mergers and Acquisitions – what should you concentrate on?

Article 3 - The deal is done. Transition advice to transition support

Article 4 - Tips for successful Business As Usual

Knowledge Share | Henry Colbeck: More than just suppliers

23 October 2019 , Durham Office

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we'll assume that you are happy to receive all cookies. However, you can change your cookie settings at any time. For further information about how we use cookies and how to change your settings, please read our Cookie Notice

I'm fine with this