In the complex world of mergers and acquisitions, traditional due diligence focuses extensively on financials, legal structures, and human resources. Yet there's a critical component that's often overlooked until it's too late: technology infrastructure. At Sentry Technology Solutions, we've witnessed how this oversight can transform promising acquisitions into problematic integrations that erode value and disrupt operations.
When a private equity firm or strategic buyer evaluates an acquisition target, the technology systems that power day-to-day operations often receive insufficient scrutiny. This oversight can lead to unexpected costs and integration challenges after the deal closes.
As our CEO John Ohlwiler notes: "A lot of the PE firms, family offices, people like that are starting to see technology, and the mishaps that could happen with not evaluating the technology, as important."
Why is this happening now? Because more buyers have been burned by post-acquisition technology surprises:
"You can walk around these circles. You can always find somebody who bought somebody else out a year ago, and now they're getting hit with all these IT costs they weren't expecting."
Consider what happens when technology integration isn't properly planned. John shares his experience as a customer and had this exact situation:
"I was a member of a bank that I had a checking account with, and they went through a merger, and I got locked out of my account for a few days and couldn't transact money and some other things like that. Had to go in several times, and it was a pain, and I ended up finally leaving that bank."
"That was a poor transition plan on their part, that was poor execution. And so whether that was lost during due diligence, or whether there wasn't a good execution on the plan, either way, I know I'm not the only client they lost."
These technology integration failures directly impact the bottom line, undercutting the projected value of the acquisition.
While financial and legal due diligence are standard practice, technology due diligence requires specialized expertise that traditional advisors often lack.
"There's several types of acquisitions obviously, but on a smaller strategic acquisition, where you're basically partnering up the example I give is, like you're a law firm here in Orlando, and, you know, you're an attorney that went to college with another attorney that's in Jacksonville."
Each firm has its own technology systems and processes.
"In that case, the person who's managing IT for each firm, whether it's internal or external, that's their baby. And sometimes it takes a good third party to come in and look at both babies because no one wants to call their own baby ugly."
This is where an independent technology assessment becomes crucial—someone who can objectively evaluate both systems and create an integration roadmap that preserves the best elements of each while ensuring seamless operations.
When considering a potential acquisition, here are the critical technology areas that deserve thorough examination:
Is the company's technology infrastructure well-documented, or does critical knowledge reside only in the heads of key employees?
"They're going to want to know that it's well documented that if somebody quits tomorrow, or, as we could say, an IT person gets hit by a bus, that all that tribal knowledge doesn't die with them on how the IT systems work and who can maintain what systems."
Particularly in regulated industries, non-compliance can lead to significant post-acquisition costs and liability exposure.
"If you're a PE firm buying up healthcare companies, and one of your healthcare companies isn't HIPAA compliant, has had an issue in the past, or is very ripe for having an issue because they aren't following things. How quickly can you mitigate that?"
How easily will the acquired company's systems integrate with the buyer's existing infrastructure?
"For that buyout, they looked a lot at how they can integrate the IT systems, how they can make it seamless, how they can not lose customer data or make customers mad during the transition period, and how do they integrate it all."
Companies using proprietary or outdated systems may require significant investment to modernize.
"We had a pest control company, insect lawn spraying company that got bought up by a firm...the owner of that company probably could have gotten a little bit more evaluation or done better if he was using a more standardized software set."
For companies preparing for potential acquisition, investing in technology infrastructure can significantly increase valuation. As John explains:
"We've done one or two, worked with some clients where, because of going in and setting security standards or setting certain IT standards in place, they were able to present their company to different buyers and able to get a higher valuation because of it."
The key factors that increase technology-based valuation include:
Unlike accounting firms that may offer peripheral IT assessments, a specialized technology partner brings focused expertise to the M&A process.
"There's some firms that are accounting firms that have started doing some IT due diligence, or have brought on some IT guys. But they aren't IT specialists. You know, they are accountants. At the end of the day, I'm an actual IT specialist that has an IT firm that's specializing just in that."
This specialized approach ensures that technology evaluation receives the same rigorous treatment as financial and legal considerations—uncovering potential issues, identifying integration pathways, and ultimately protecting the value of the investment.
As technology becomes increasingly central to business operations across all industries, its role in M&A transactions will only grow in importance. Forward-thinking buyers and sellers are already recognizing this shift:
"I think you're going to start seeing where technology is a big strategic factor the business. And because of that, technology is going to need to be at the table during due diligence, during the integration period, during things like that."
By bringing technology evaluation to the forefront of the M&A process, companies can reduce risk, streamline integration, and ultimately realize greater value from their acquisitions.
Sentry Technology Solutions empowers businesses with strategic technology leadership, combining managed IT, enterprise-grade cybersecurity and AI-powered solutions with hands-on guidance. As your trusted technology partner, we help businesses navigate complex technology landscapes during mergers and acquisitions, delivering the confidence executives need for successful transitions in today's digital-first business environment.
Learn more about how our services can help protect and enhance the value of your next transaction.