IT due diligence

In the context of M&A transactions, thoroughly examining potential risks is essential to avoid making poor legal, financial, and strategic decisions. While financial and legal due diligence has long been standard practice, IT due diligence is often underestimated. Given the increasing complexity of IT and the growing cyber threat, it is one of the most important components of a successful transaction.

What is IT due diligence?

IT due diligence is a structured process that identifies, evaluates, and addresses potential risks in a company’s IT infrastructure, IT security, IT governance, including IT licensing and data organization. It aims to avoid serious consequences such as data loss, business interruptions, or reputational damage and to incorporate identified risks into the decision-making process regarding the transaction.

Why is IT due diligence so important?

In an era where cyber attacks increasingly threaten companies, inadequate IT infrastructure protection or improper data handling can cause lasting damage:

• For buyers: Acquiring a company with inadequate protection or unidentified risks carries the risk of costly security incidents.
• For sellers: Inadequate cyber security can result in warranty and compensation claims and have a negative impact on the sales price.

With an IT due diligence, the transaction parties can analyze the IT landscape of the target company, eliminate weaknesses and thus proactively minimize risks or regulate corresponding indemnifications and limitations of liability.

What are the advantages of an IT due diligence?

Comprehensive IT due diligence reduces the liability risk for both parties to the transaction by identifying potential threats and unaddressed security gaps at an early stage and addressing them in a targeted manner, both technically and legally. At the same time, the structures can be checked for compatibility with the potential buyer during the process. This not only protects the company from potential security incidents, but also from failures, data loss and reputational damage that can occur in crisis situations. In addition, a detailed audit ensures increased transaction security: buyers receive clarity about the IT security of the target company, while sellers can emphasize the value of their IT infrastructure and its resilience. Another advantage lies in the optimization of integration and migration after an acquisition, as the thorough analysis of the IT structure facilitates the integration process and ensures a smooth merger in the long term.

Our IT due diligence services

Our experienced team will support you in carrying out an IT due diligence, regardless of whether you are a buyer or a seller:

• Analysis and evaluation of guidelines and processes
  We analyze the data protection strategy, security concepts and IT governance.
• Clear and darknet monitoring
  We identify potentially published data, e.g. access data, as well as fake stores, domain squatting or other fraudulent activities at the expense of the target company.
• Identification of weak points
  We investigate critical security vulnerabilities that can affect the company’s valuation.
• Review of third-party risks
  We evaluate service provider management in order to assess risks from external partners.
• Preparation of a comprehensive report
  We provide a detailed description of the target company’s IT governance and cyber security, including red flags, potential exclusion criteria and suggestions for improvement.
• Recommendations for action and roadmap
  We develop concrete measures for you to eliminate weak points, including a cost and time frame for their implementation.

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