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We conduct financial, tax, commercial, operational, IT and cyber diligence to help you identify transaction value drivers, improve M&A deal structures and mitigate risks. We also help challenge assumptions about future performance so you can choose the right valuation.
What EY-Parthenon M&A Due Diligence Consulting can do for you
We conduct diligence to help you answer questions about the value drivers of your deal. Our clients include large cap and middle market organizations, as well as private equity funds. Read more about our due diligence services below, including special considerations for diligence on digital companies, including digital startups.
What is the strategic rationale for this deal and what makes this target attractive?
What incremental markets, customers or sales channels will be created or accessed by this acquisition?
How does this transaction enhance our brand or market position?
Do historical reported results accurately reflect run-rate profitability? Do you have the right data to support your forecast?
What factors, if any, will affect the purchase price?
What balance sheet and off–balance sheet exposures concern us most?
How could accounting issues materially affect reported results or disclosures after closing?
How will changes to peoples’ roles, responsibilities, and hierarchies inform the overall organization’s design?
How will compensation and benefits programs that align to the future state vision be designed, implemented and rolled out to employees?
What targeted actions must we take to align leaders, the business, and employees to create a seamless onboarding experience?
What is the true IT cost baseline, and what purchase price impacts should be considered?
Does the IT setup enable the investment thesis (scalability, speed-to-market, product/digital capabilities, operating model)?
What are the long lead-time integration constraints that drive timing, synergy realization, TSA needs and execution complexity?
What is the source of synergies and how are they quantified?
What are the key Day One and post–Day One operating risks and priorities?
What synergies are available (revenue, cost, tax, balance sheet, etc.)?
Are appropriate plans in place to implement and capture synergies?
What regulatory issues could threaten compliance or erode transaction value?
How could potential regulatory changes affect the target’s ability to achieve projected growth?
What material cyber risks exist (vulnerabilities, control gaps, third parties) and what is the valuation/deal-term impact?
Is there evidence of compromise or elevated exposure (incidents, ransomware, data loss) and what is the business impact?
What remediation and long lead-time items (identity, network segmentation, tooling) drive cost, timing and integration complexity?
Is the purchase consideration complicated?
Is the board protected through an outside opinion of value?
Are the impacts of opening balance sheet valuation adjustments clearly understood?
Will tax structuring require a thoughtful understanding of value to achieve maximum efficiency?
EY-Parthenon M&A due diligence consulting when acquiring digital companies
Special considerations for digital companies, including digital startups
As technology disrupts traditional business ecosystems and the competitive landscape, we can help you consider the unique aspects of diligence surrounding valuation, talent, product and commercial strategies when you pursue buying digital companies, including startups. These companies create customer value through the use of digital technology, and focus on capturing, storing and processing data. They incorporate a technology lens into everything they do to better serve stakeholders.
Brand or product transformation may be more important than cash flow in the near term. Correctly assessing synergies and risks that differ from the core business may be critical and can be difficult to measure directly, particularly if a business isn’t profitable yet.
Valuation questions to consider:
Where are the target’s value drivers and digital revenue synergies from the investment?
What digital metrics (key performance indicators) can be defined and factored into valuation calculations?
When and how will you reap returns on your investment?
What risks are associated with the digital asset?
Getting the talent strategy right can make or break a deal, which may include founders, engineers and technologists whose talent is the lifeblood of the business.
Talent questions to consider:
How is the organizational and governance structure different from your own?
Who is the critical talent, and how should you structure the retention?
What are the differences in culture and policies?
What are the unique skill sets and capabilities?
What role will founders play in setting strategy and vision?
Our market-leading software M&A diligence engagements include providing guidance on competitive and market trends, market size and growth, product capabilities, go-forward product roadmap, underlying technical architecture, and software R&D organization. We enable our clients to understand a software company’s ability to execute against its corporate strategy while also identifying opportunities and risks. We work with clients to answer the following questions:
Technology assessment: is the software company’s product portfolio, as well as the R&D team, built to support our client’s investment thesis (e.g., market share growth, new market entry, changing market dynamics, future M&A)?
Product ecosystem: how does the company’s product capabilities and technology compare to those of competitors? How is the space evolving, and how are customers and vendors responding to this? What is the company’s key value proposition?
Commercial assessment: what is the software company’s total addressable market and serviceable market? How is the serviceable market segmented? How do customers in this market perceive the product capabilities of the various players in this market? How do users decide to purchase a solution?
Companies need to consider how they will incorporate new selling models, new customers that engage with their products in a different way, and more data to be collected and analyzed.
Commercial diligence questions to consider:
What is the target’s go-to-market strategy, and how is it different from the buyer’s strategy?
Who are the new customers, and what are the potential revenue streams?
How will new products and services affect existing customers?
How can the existing customer journey be enhanced in new channels?
EY-Parthenon M&A Integration Consulting teams can help you integrate assets while preserving value, accelerating synergy realization and minimizing risk.
