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FM Analysis IT K Q
PMG is a Global network of professional firms providing Audit, Tax and Advisory services; operating in 152 countries with
145,000 people in member firms around the world. 3,700 professionals and 104 partners are working in 19 offices of KPMG in Russia, Ukraine, Kazakhstan and other CIS countries.
Why would a business need IT Due Diligence?
According to a KPMG study conducted at the end of 2011, just 31% of merger and acquisition deals fully justify expectations. More than 40% of synergy effect from merger and acquisition deals is achieved through IT consolidation by the integration and implementation of new systems and IT services and appropriate allocation of IT resources. To obtain the desired result and avoid possible risks of failing to meet expectations, these risks need to be clearly understood and the financial implications of using the IT evaluated. An inaccurate assessment of such risks could lead to a decrease in the company’s financial and operating indicators after the merger. IT costs can make up 30–40% of a company’s operational costs, and are a serious factor in transaction cost assessment.
Due Dilige
German Sukonnikov is a Director in Management Consulting department, KPMG Russia and the CIS. German leads the CIO Advisory team that provides our clients with IT Due Diligence services as well as IT Strategy, Performance and Governance services.
The efficiency of IT investment management directly impacts a company’s stability and value. Therefore, it is vital for the buyer and the seller to obtain full information on potential IT risks and problems.
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Can you discuss how KPMG provides IT Due Diligence services
for companies?
KPMG offers a wide range of IT due diligence services for both the buyer and the seller. These services cover all merger and acquisition transaction phases, including IT due diligence, negotiations assistance, contracting and follow-up integration.
At the deal preparation phase we help our clients to:
• Assess the capabilities of IT to support sustainable growth of the company’s business;
• Identify potential technological limitations, risks and possible expenses related to the initial phase of the merger;
• Assess impact of IT on revenue, expenses and the goals of the future synergy.
Depending on the agreed scope of work, we do either an IT review involving a brief analysis of the current state of the IT and the changes planned for it, or detailed IT due diligence – a
deeper analysis of the state of the IT environment, covering a wide range of areas.
After the deal closure, KPMG professionals assist in IT integration in the merged company, particularly in:
• Developing a target IT organization model, including an IT operational model, organizational structure, roles and responsibilities, and key performance indicators
• Developing or amending the IT strategy and updating the IT project portfolio
• Replacing or enhancing key business applications
• Defining and helping to create an IT cost optimization strategy
• Optimizing IT project management and IT department operations
• Monitoring implementation of the plan for integration and consolidation activities
• Separating IT environments during the sale of business part of the company
KPMG professionals provide unbiased and detailed consultations on possible integration options and IT strategy development after the deal, they also identify potential commitments in this area (licensing, third-party dependencies, etc.), and numerically estimate the synergy effect of using IT in order to show