DUE DILIGENCE

What is IT due diligence?

Our IT due diligence service provides an independent assessment of a business’s IT and digital systems, infrastructure, assets, processes, policies and procedures.

The examination seeks to identify key material IT risks, including deal breakers, while also uncovering performance issues, liabilities, opportunities and potential investment needs.

‍

Why do you need IT due diligence before making a buying decision?

IT due diligence helps acquirers understand whether the target business’s technology supports its current operations, future strategy and commercial value. It gives clarity on cost, risk, scalability, security, integration potential and the level of investment required after completion.

Typical use cases include:

• Understanding how well the current IT systems and software support the target business.
• Assessing how IT is organised and the underlying processes and procedures that support the target business.
• Reviewing what IT infrastructure supports the target business and how IT security is established and governed.
• Identifying how the target business’s IT capability is aligned to its current and future business strategy.
• Reviewing current IT costs and potential investments required.
• Identifying material IT risks, including potential dealbreakers.
• Highlighting performance issues, liabilities and opportunities that could affect valuation, negotiation or integration.
• Evaluating key strengths and synergies to understand how the target business aligns with potential integrations.
• Assessing whether technology, systems, software and infrastructure are scalable enough to support future growth.
• Reviewing whether the target business has the right IT roadmap, team capability and governance to deliver its strategic objectives.

Our IT due diligence activity can be adapted depending onthe nature of the target business. Typical areas of investigation include, but are not limited to:

Business systems and software

• Map out the software landscape, including integrations and data sources.
• Review licences in place versus actual usage.
• Review software types in place, including mainstream products, open source and obscure products.
• Review software versions in place, including whether software is end of life or old versions are in use.
• Identify systems and software support levels.
• Ascertain how current software type and licences align tofuture strategy and any investments needed.
• Review scalability.
• Review reliability.

Businesses developing software

• Identify intellectual property rights.
• Review development platforms and tools utilised, including mainstream platforms, vintage platforms and open source.
• Review open source components.
• Identify and review any third-party components or dependencies.
• Identify and review database requirements.
• Conduct stress testing of the developed product to identify future capacity, break points and related risks via a testing partner.
• Conduct security testing of the developed product via a testing partner.
• Complete source code review via a development partner.
• Review software development methodology and general practices.
• Review change management and release processes.
• Review the development backlog.
• Review the approach to testing and quality assurance.
• Review client support call history and as certain client satisfaction levels.
• Review the development and product roadmap.

‍Third-party vendors

• Review third-party contracts.
• Review third-party service level agreements.
• Review third-party performance history.

IT project portfolio

• Review project management methodology.
• Review project risk logs.
• Review project documentation.
• Complete health checks of in-flight projects.
• Conduct cost analysis of in-flight and planned projects.

IT financials

• Review licence usage and confirm payment status.
• Compare current usage to licence amounts.
• Review contract statuses and future payment commitments.
• Advise on any predicted additional spend required to meet business objectives and strategy.

People and processes

• Interview top members of the target firm’s technical team to understand proficiency.
• Conduct group and one-to-one interviews with the remaining team.
• Review key core processes and procedures,including GDPR compliance.

IT security

• Review security practices and governance.
• Review third-party vendors.
• Conduct physical security review.
• Conduct logical security review.
• Complete security testing via a testing partner.
• Complete penetration testing via a testing partner.

IT infrastructure and operations

• Map out IT infrastructure.
• Map out the IT hardware landscape.
• Detail inventory and ownership.
• Review capacity for both current operations and futuregrowth.
• Review resilience.
• Review compliance standards and audit frequency.
• Review backup procedures.
• Review disaster recovery plans and procedures.
• Review cybersecurity practices and processes.

IT strategy

• Review the IT roadmap.
• Assess alignment to business strategy.
• Review roadmap feasibility of execution by the current team.
• Review the ability to address market needs with clarity onproduct or service gaps.
• Assess alignment to the acquirer’s strategy or vision.
• Identify technical synergies or blockers.

‍

The key benefits of IT due diligence

IT due diligence gives acquirers the clarity to make better commercial decisions, protect deal value and avoid costly surprises after completion.

Key benefits include:

• Enables the acquirer to be fully informed of the IT costs and risks before making a buying decision.
• Early identification of IT risks, including deal breakers, allows the acquirer to flex negotiations accordingly.
• Identifies key strengths and synergies, allowing the acquirer to evaluate how the target business aligns to any potential integrations.
• Provides a totally independent, unbiased assessment.
• Highlights potential investment requirements before completion.
• Supports more informed valuation, negotiation and integration planning.
• Gives clarity on whether current systems, software, infrastructure and IT capability can support future growth.
• Helps identify risks that could affect operational resilience, cybersecurity, compliance or business continuity.

Ballards: your trusted partner for IT due diligence

Ballards combines commercial insight with practical IT and digital transformation expertise, helping acquirers see the full picture before making a buying decision.

By partnering with Ballards, you benefit from:

• An independent and unbiased assessment of the target business’s IT and digital environment.
• A commercially focused review that identifies risk, cost, opportunity, liabilities and potential investment tneeds.
• A flexible approach that can be adapted depending on the nature of the target business.
• Practical insight into how IT systems, software, infrastructure, people, processes and security support the target business.
• Clear identification of potential deal breakers, technical synergies and integration blockers.
• A review that looks beyond risk to identify strengths, opportunities and value creation potential.
• Support from IT and digital transformation specialists who understand both technology and business strategy.
• A structured approach that helps acquirers understand what they are buying, what needs investment and what could affect future performance.
• Clear, actionable recommendations to support negotiation, completion and post-deal planning.
• A joined-up view of IT capability, security, systems, costs, governance and strategic alignment.