Due Diligence

In any Mergers and Acquisitions (M&A) activity a pre-requisite step is to perform due diligence upon the target company to be acquired. The objective of due diligence is to minimise the acquiring company's exposure to risk by understanding the problems associated with the acquisition.

For the due diligence analysis to be effective it is necessary to have a good understanding of the required benefits of the acquisition. Typical benefits of a merger or acquisition are:

Improved profitability by consolidation of resources and reducing capital and operational expenses
Economies of scale through larger production facilities, stronger purchasing power etc.
Expansion of product range from the acquired company's product lines
Expansion of geographic coverage from the acquired company

For any medium or large target company there will be a considerable investment in IT and telecommunications technology. It is vital for the acquiring company to understand the long-term cost implications, scalability issues, integration costs and consolidation opportunities associated with the target company's choice of architecture and technologies. For mergers of telecommunications companies it is also important to determine the opportunities to optimise the enlarged network infrastructure.

Capacitas can provide technical consultancy services to assist an acquiring company with due diligence. Some examples where Capacitas can assist are:

For merging companies with large IT infrastructures; rapid analysis of:
- Scalability of software and hardware infrastructure
- Total lifetime cost of ownership for software and hardware assets
- Cost of infrastructure integration
- Accuracy of existing capital and operating expenditure budget forecasts
For merging companies with large telecommunications infrastructures rapid identification of:
- Telephony and data network consolidation opportunities (e.g. VPN)
- Alternative technology or vendor solutions to reduce operational costs (e.g. VoIP)
For telecommunications service providers:
- Reviewing the migration and consolidation of traffic across network nodes
- Determining the most effective routing of consolidated backbone traffic

Key Benefits

Minimising risk of failure to meet objectives in a merger or acquisition
Discovery of serious ICT infrastructure integration and scalability risks
Rapid forecasting of cost savings possible through ICT integration
Identification and analysis of potential infrastructure consolidation opportunities
Forecasting of lifetime costs of infrastructure
Verification of acquisition target's ICT CAPEX and OPEX budgets

Using Capacitas's Due Diligence Service enables the client to clearly quantify the technology risk of an acquisition and to accurately assess the return on investment (ROI) of the acquisition.

If you wish to find out more about the Capacitas Due Diligence Service please contact us.