Until recently, many healthcare system mergers and acquisitions took the form of a “holding company” approach as it pertained to IT assets and services.
Acquisitions would largely function independently with their own IT organization and only integrate where needed. This paper “M&A Due Diligence: Seven Things the C-Suite Should Know about IT” takes the position that the holding company model of IT integration for acquired entities is inadequate to meet the demands of today’s market.
Market demands and internal, enterprise requirements for IT – including digital health and IT’s role in advancing strategic imperatives and cost containment – often require integrating the IT platform of acquired entities more closely with the acquiring institution.
As a result, it is more critical than ever to consider IT in early stages of M&A due diligence. Assessing the IT landscape and costs is a key step in getting the deal’s financial model right and setting the course for a successful integration and post-Day One transition.
Mike Crow, an Associate Principal with the Chartis Group and co-author of the paper noted:
“We have found that developing an IT cost model and associated IT budget early in the acquisition process is critical to understanding the total cost of the acquisition and can materially impact the value and success of the deal.”
The paper includes seven leading practices to follow during due diligence to position an enterprise for success during an acquisition:
- Plan for rapid transition to a common, integrated IT services platform
- Know the data part of the deal
- Understand IT staffing and the contractual obligations and model a pro forma alongside the rest of the deal
- Solidify IT transition terms as part of the overall agreement for divestitures
- Review recent cybersecurity audit findings and insist on a follow-up third-party audit just before deal closing
- Understand your facility IT
- Set the stage for success with IT and operations working side by side
Kent Gray, Chartis Principal and co-author of the paper stated, “It is mission critical for the full executive suite to know the key IT areas during due diligence to dramatically reduce acquisition costs, risks and time to completion.”
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