Not a “Technology Company” Myth
There is a pervasive Myth in Middle-Market M&A — That IT-ODD is only necessary if the Target is a “technology” company and that if the Target is not a “technology” company, specialized/Non-Financial Tag-on IT Due Diligence is sufficient.
All enterprises, in all industries, utilize information to acquire customers, generate revenues and record results. While the size and complexity of the Target’s operations will require varied deployments of IT capabilities, all enterprises have some IT capabilities deployed. Accordingly, an appropriately scoped IT-ODD effort will provide a meaningful assessment of those capabilities and the enterprise’s ability to leverage available information technology components. Often, lower middle market “technology” companies have minimal IT capabilities supporting their business operations, despite generating revenue from advanced deployments of information technology components.
The key in middle market transactions is not to circumvent performance of IT-ODD, believing the Myth. Rather, the key is appropriately scoping the IT-ODD effort to be truly relevant for the transaction.
It is fact that most longstanding enterprises that are dependent upon legacy industry practices and company processes cannot achieve the productivity, scalability and nimbleness of those enterprises that have been established utilizing current-state information technology components. This is true in:
- Manufacturing where technology enables collaborative, low-cost, just-in-time global manufacturing approaches.
- Logistics, transportation and distribution utilizing bar code scanning, RFID and other technologies.
- Industries which need to provide standard services with consistent quality across geographic regions.