Post Close IT Assessment vs. PRE-CLOSE IT-ODD Services

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Essentially, our Post-Close IT Capabilities Assessment advisory services are our core, pre-close strategically focused IT-ODD advisory services conducted post-close.  

As such, we assess the acquired Company’s IT capabilities as a sufficient platform for supporting existing operations and enabling defined, strategic growth objectives.  IT-related operating practice risks are assessed, with remedial recommendations identified.  Our IT Capabilities Assessment advisory services provide a superior, practical and actionable perspective regarding the Company’s existing IT capabilities and those required to enable the Company’s business operations and strategy vs. a traditional IT Strategy consulting approach, which our prior experience has often seen to be too difficult for Companies to implement as prescribed and achieve promised benefits.

In a transactional setting, the election to perform an IT-ODD-type assessment post-close is solely a matter of timing — the scope and purpose of the two activities are exactly the same.  The same comprehensive set of IT capabilities components must be assessed in the same manner, regardless of the timing relative to closing.  In both cases, the acquiring entity must be the sponsor for the IT-ODD effort, regardless of how it is funded.  A different description of the activity is warranted only because performing “due diligence” after the fact seems ill-timed.  A greater difference exists between IT-ODD and a technical review of a company’s IT capabilities deployment to determine if standard, customary practices are utilized and if an appropriately configured platform exists, with the objective of identifying tactical suggestions for improvement and optimization.

Such a review is useful as an “IT tune-up” or diagnostic evaluation in order to determine if a more efficient functioning of a company’s IT capabilities is possible.  However, such a detailed, focused review is unnecessary to ascertain if the IT capabilities act as an asset or liability in the transaction.  Unfortunately, often times, these types of diagnostic evaluations are conducted by IT consultants as transactional IT-ODD efforts leaving the acquiring entity with an insufficient and incomplete perspective of the Target’s IT capabilities as a leveragable asset or encumbered liability requiring far more investment beyond a refinement of an infrastructure component or improved network security policy.

Our strategically-focused IT-ODD advisory services leverage our prior information technology and business transformation experience to provide a judgment-based perspective regarding strategies for how the Target can leverage its IT platform to enable effective business operations and growth.

This distinction is critical for the acquiring entity to understand because it defines the fundamental objective and intent of the IT-ODD services provider’s engagement as well as the IT-ODD services provider’s anticipated ongoing business relationship with both the acquirer and the Target.  Any circumstance in which an IT-ODD services provider anticipates a development of an ongoing business relationship with the Target is not in the best interests of the acquirer, as well as compromises the independence of the IT-ODD services provider regarding the transaction.

An IT-ODD effort is an “independent assessment” that seeks to provide an objective, unbiased evaluation of the IT capabilities which exist, including any budgeted, planned enhancements, and a determination if those existing IT capabilities will be an “asset” or “liability” to the Target and the acquirer’s interests post-close.  The findings of an independent assessment are statements of fact based upon specific evidence.

Where weaknesses are identified requiring remedy — if properly explained, Target personnel and/or any competent services provider generally available in the market should be able to understand and implement the recommendations as described.

By definition, an independent assessment is a standalone activity that cannot be conducted with any expectation of follow-on services or revenue without compromising “independence”.

A “consulting diagnostic” evaluates the deployment of IT capability components with the intent to identify tactical weaknesses within the existing configuration and operational practices in order to define specific remedies and a plan to assist in the implementation of those defined remedies.  By definition, the consulting diagnostic is subjective since it anticipates a multi-phase services engagement and is usually biased by the specific capabilities and resource availability of the services provider, especially those personnel conducting the diagnostic, thereby resulting with a continuity concern (i.e., facilitating the one-stop-shop services delivery model).

In our opinion, a tactically focused “consulting diagnostic” can be a valuable exercise, especially when specific IT capability component weaknesses have been identified.  However, the “consulting diagnostic” approach does not appropriately diligence the Target’s IT capabilities as is required in a pre-close transactional setting.  Often, acquirers engage a “consulting diagnostic” approach for IT-ODD seeking the convenience of the “one-stop-shop” and “familiarity continuity” embedded within the approach.  However, it has been our experience that, with the deployment of open-architecture technologies and commercial application software packages or development tools, the need for such convenience is not necessary with these IT deployment practices.

Aqualis Advisors’ strategically focused IT-ODD advisory services leverages experience to provide a judgment-based, independent assessment of the Target’s IT capabilities.  

While all IT-ODD and IT Assessment advisory services engagements have resulted with suggestions for improvement and/or remedies for correction of itemized deficiencies, these recommendations are not designed to require our ongoing, fee-based participation in order for the acquirer or Target to achieve successful implementation post-close, except as may be specifically requested by our Private Equity Clients. 

• Is the potential investment exposure which must be factored into the transaction economics materially significant?
• What is the anticipated remedy timeframe relative to the anticipated holding period of the investment?
• Does the Target have sufficient internal capacity and capability to remedy?
• Will the Target’s IT capabilities create any materially significant post-close operational risks?  IF Yes — then what is the potential remedy and impact?

  
  

  In an independent assessment, remedy should always be clearly understood and implementable by either the Target or any sufficiently qualified external 3rd party entity.

Our core strategically focused IT-ODD advisory services are expanded to assess both the Target’s IT capabilities utilized to support business management activities as a sufficient platform as well as assessing the specific deployment of IT capabilities, practices, and resources to generate revenue from its technology based offering.

Technology focused enterprises include SaaS offerings, commercial software applications, professional services and Internet offerings as well as advanced deployments of eCommerce and Internet capabilities within non-technology companies.

IT-related transaction and operating practice risks are assessed, with any necessary remedial recommendations identified.

A written report of findings and recommendations is generated subsequent to ~1-2 "virtual" discussions with Target personnel  in order to validate the actual deployment of the Target’s IT capabilities with regard to both utilizations.

The focus of IT-ODD on a technology services Target (which is focused on software products, information technology services, Internet offerings, etc. excluding the manufacturing and distribution of technology hardware equipment) is expanded beyond the core review of the deployment of IT infrastructure, application and operations capabilities of an enterprise which typically has an IT department and/or expense classification (non-technology services company).

While those necessary issues will be assessed, with a technology-services Target,  the primary focus of IT-ODD is to determine the effectiveness of the enterprise’s technology services revenue generation activities, including the management of software product development activities, real-time provisioning of capacity and SaaS services, resource development and competency management, operating practices (i.e., including the inherent protection of developed intellectual capital within those practices).

Our strategically-focused Pre-Close IT-ODD Technology Focus Specialty Assessment Advisory Services  leverage our prior software development and practice management leadership experience to ascertain that the Target’s internal practices and structures deploy sufficient mechanisms to support a growing business model with increasing margins.