Due Diligence Alert: 8 Technology Landmines to Avoid a Potential PE Acquisition
By Arvind Kapur
As companies shift operational processes to the digital realm, any failure to streamline, integrate and consolidate will create technological bottlenecks that might not be revealed for months or even years. In a private equity acquisition, hidden digital disorders can quickly turn into landmines that destroy any chance of a high return on investment – as well as hinder the journey to digital transformation.
That’s why it’s critical to scrutinize every single aspect of the managed company’s business, delving deep into the complete value chain prior to acquisition to understand key areas of technological impact and deficit. Time is often of the essence during acquisitions, but a baseline technology audit can be completed in just seven to 10 days.
Firms should think of a technology audit as analogous to a home inspection. You’d never buy a house without a thorough inspection for any hidden flaws or pricey fixes, and you should never invest in, buy or merge with a company without a diagnostic dive into these eight areas of the business.
- Customer engagement, to:
- Create an emotional connection between the brand and its customers to maximize recall, loyalty and wallet share
- Use fast feedback mechanisms to increase business responsiveness
- Ensure consistent, high-quality branding
- Execution and delivery, driven by:
- Ongoing time-to-market pressure and quality of service
- A demanding, ever-changing market that requires lightning-fast responsiveness
- The need for predictability and guaranteed quality of service
- Technology and platform, critical for:
- Accelerating goals within a specific business framework
- Seamlessly integrating applications and technology within operational processes
- Supporting development of solutions with low TCO and high ROI
- Data, necessary for:
- Enhancing information availability and organizational support
- Automating key metric gathering
- Adopting trend analysis and informed decisions
- Organizations must:
- Identify and ingrain key elements of “organizational DNA”
- Cultivate continuous mentorship and training, especially for younger workers
- Coordinate business units through common goals and regular collaboration
- View culture as a corporate asset
- Digital operations. Integrating and streamlining digital systems can help:
- Achieve an objective-focused target operating model
- Extract insights from internal and external sources to enable better decisions
- Shift focus of digital transformation from solely customer-facing areas to operations
- Capacity and capability, to be able to:
- Implement processes and structure that enable effective scaling
- Align capabilities, both internally and with respect to competitors
- Forecast future demand and respond based on quantitative data.
- Content, to:
- Develop tracking and version control implementation, which facilitates compliance audits
- Quantify content effectiveness and attribution
- Automate publishing across all channels, including managing repository and workflow
- Improve the overall content quality and quantity required to meet business needs.
These eight areas touch every single part of an investment: marketing, sales, finance, procurement, supply chain, operations, logistics, services and more.
There are clear advantages to learning this information early, but a technology audit is valuable no matter where a private equity firm is in the acquisition process. If there are any operational potholes or technological flaws in any one of these areas, it’s going to negatively impact the financial outcome of the private equity firm’s investment, as well as impede the firm’s own digital transformation.
The only way to reliably deliver on the PE firms investment horizon is by making strategic improvements across the entire value chain – and proven technology audit methodologies guided by the experts can help firms maximize their ROI and become a player in the digital economy.
All you minimally need are seven to 10 days to evaluate the technological health of your potential investment. Learn more about each of these eight critical areas in our forthcoming blog series on the JointStrike methodology.