IT Due Diligence
The IT Success Factor in Corporate Transactions

IT Due Diligence: The IT Success Factor in Corporate Transactions

A study by Lünendonk & Hossenfelder GmbH in collaboration with kobaltblau Management Consultants

The market for M&A transactions has developed quite dynamically in recent years: according to KfW (the German government-owned development bank), an average of 1,100 M&A transactions took place every year between 2005 and 2017, in the SME sector in Germany alone. Even in 2020, the year of the COVID-19 pandemic, the M&A market in Germany did well, as compared to global performance, specifically in the small deal volumes. Sectors such as medical technology, healthcare, the digital and IT industries and infrastructure saw some action. As many industries are still suffering from the COVID crisis, the need for new capital in the form of investments by investors and mergers will certainly continue to increase to secure future growth.

In any case, the circumstances for M&As are positive: the interest rate environment is at a historically low level, and institutional investors are looking for attractive investment opportunities. For these activities, carrying out comprehensive due diligence in evaluating market-related, legal and financial opportunities and risks is crucial. Unrecognized risks often significantly reduce the return on M&A deals.

In particular, loopholes within IT and software competence can have a negative impact on digitalization. It is not uncommon for investors to invest more capital later on to modernize IT systems because the IT due diligence wasn’t comprehensive enough in the
preliminary stages.

Determining the performance and adaptability of IT is often decisive for success and therefore deserves special attention, especially in the pre-deal phase. However, did the investors surveyed for this study adequately consider IT and its influence on M&A success? And which factors in IT due diligence do the deal makers consider important and what is their significance in the decision-making process?

The entire study, with the answers to these and many other questions, is now available for free download.

We hope you enjoy reading this and look forward to your feedback!