tax audits

Acquiring a Company? Save Money with an IT Audit!

There is a lot to consider during the due diligence process of a merger or acquisition. The focus is primarily on the company’s books because the financial records tell a big story about that firm’s financial health. But, they don’t tell the whole story–especially regarding the state of a company’s business technology and the unexpected expenses and liabilities that you may incur after the sale.

Sure, things appear to be working, but how do you know if are you inheriting an old jalopy or a finely tuned machine? How old is their IT hardware (computers, servers, firewall, etc)? Are they in compliance for record storage requirements and software licensing? Have they ever had a cyber intrusion or a theft of customer data?

Doing a full IT audit may tell quite a different tale about the state of the other company’s computing network, and the real value of the organization.

Too many times, we’ve seen small companies who are looking for a buyer make themselves look more profitable (and therefore more attractive as an acquisition) by cutting corners they shouldn’t, and an area that often suffers is their IT assets.

Typical problem areas: neglecting to upgrade a server, failing to renew software licenses, and not replacing older workstation/desktops that have greatly outlived their usefulness. Networking appliances are typically neglected as the company looks for ways to show higher profitability on the books for a few years.

Not investing in the routine maintenance and replacement of IT assets isn’t thrifty; in the long run, it’s expensive and can end up costing the acquiring company a lot of money unexpectedly after the transaction is done. Just as you’d bring in an accountant to review the financial records, bringing in an IT service consultant to conduct a thorough audit of existing IT assets could save a lot of needless stress and dollars.

Benefits of an IT audit

Making a small investment in an IT audit during the due diligence process will save you time and aggravation later – as well as thousands of dollars.

There is no way for you to validate the status of an organization’s IT systems without an audit, and as with any business transaction, it’s always best to go in eyes (but not necessarily wallet) wide open to make the best business decision.

An IT audit will indicate shortcomings such as the need for obsolete operating systems and software, hardware that is out of lifecycle, security vulnerabilities, and compliance risks.

Revealing the current network’s inadequacies will give you a bargaining tool to reduce the purchase price in anticipation of your expenditures to get the system up to snuff before you conclude the transaction, After all, you’ll never recoup the money you’ll end up spending down the line on long-overdue, necessary IT upgrades or replacements.

Enterprises and large private equity firms conduct IT audits during acquisitions as part of the process all the time; small and medium-sized businesses should undertake this important fact-finding audit as well. It’s simply the smart thing to do.

If your NJ business is in merger & acquisition mode, contact IND Corporation to discuss the benefits of a pre-emptive audit of the other company’s IT system to save you time and money!