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IT due diligence for private equity group

May 31, 2017 Case Study 1 min read
Due diligence of IT processes and ERP systems aids private equity group’s acquisition of a $38 million software and accessories distributor.

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The client

A private equity group was in the process of acquiring a $38 million software and accessories distributor. The distributor develops bundled packages of software and specializes in fulfilling high volume orders, for software, hardware, and support services, in excess of 70,000 units per day.

The challenge

The software distributor used a custom written EDI and order processing soft-ware to accommodate the high volume of orders not supported by its current ERP system. The proposing private equity firm requested we identify the risks and gaps in the distributor’s internal IT processes and the interfaces with the custom software and ERP system. The firm also requested calculations on projected IT expenses for the following three years.

The solution

Our team reviewed provided data room information and additional documentation. The team conducted site visits to the office and warehouse facility to examine the IT environment; interview IT, management, and operations staff; and review the data flow from order to shipment. As a result, we compiled a comprehensive due diligence report containing budgets, findings, and an assessment of critical IT processes. The report findings were then reviewed with the proposing private equity group.

The benefit

Our team completed all due diligence activities in a required two-week timeframe, and upon completion, the private equity group successfully closed the acquisition. While the software  distributor’s IT department implemented creative solutions to address its business capabilities, we identified significant risks to data integrity and reliability due to informal processes. To aid the private equity group’s IT transition following acquisition,we provided a list of activities to complete within the first 100 days in order to remediate identified IT gaps and vulnerabilities.

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