Do any use in-house IT to perform DD or use a 3rd party
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I was wondering what was the consensus on use of in-house IT to perform DD or use a 3rd party to perform an IT DD. I was wondering as from my experience IT was a ‘afterthought’ and now we have IT person on the M&A Team that does this.
Earlier in our organization, the task for performing DD was outsourced to third party. Since they are outsiders, they had to consult with business function leaders to perform their job which was counter productive as these leaders couldn’t give them much of their time because of their busy schedules as they had their day job to support the business operations which resulted in half baked due diligence being performed by this third party and we saw all the issues that should have been addressed during DD coming up in PMI.
After that we have stopped using third party consultant and dd is performed by IT M&A team.Thanks for your view on this topic, much appreciated! I can see where a 3rd party IT DD can become more of an hindrance then being productive.
I have personally experienced both scenarios (in house IT and 3rd party) to conduct diligence. While working in industry we did not have a formal M&A practice however we purchased a couple of food manufacturing facilities and we conducted our own diligence, I will say it definitely did not have the same rigor as what I use now working in the consulting space specializing in advising our clients with the M&A process. Later I did work with a life sciences company that did have an internal M&A team that would conduct diligence however it still was not as sophisticated as what we do in consulting, this is likely due to the volume that we produce versus how many the life science company would do per year. I say all of this to illustrate that internal IT diligence efforts can still be good but when you need a deeper level of understanding, it may be a good idea to work with a 3rd party who specializes in this space.
Hi Team:
Would it not be best to work with external experts but to also have internal team members that understand what is being done and help coordinate with the external entity? It seems like with just about anything, completely internal or completely external would be limiting as external experts have the resources needed to allocate time and effort to the DD review yet they would lack a good understanding of the company’s business culture, etc.
~Pamala
If the company does not have in-house IT department to perform DD, it is imperative to seek 3rd parties who are proficient in such DD and understand the reasons for acquisition to provide a holistic DD.
I see Meg’s point where the 3rd party consultant might not understand the business and have to gather information from scratch, which they later packed it into a bundle and present something that most of the people in the company already knew. I think it is definitely good to have a 3rd party if the 3rd party has strong technical and experience in the industry, the only problem is there are not much of such 3rd party.
At my current company, we use in house IT who are very skilled at gathering information during the due diligence process. Although it is a positive that they are familiar with the nuances our or company and industry, it does put a big strain on the individuals who do this in addition to their day job. I think it comes to down to volume and sustainability. If we begin to do more deals then our existing team can support, we’d have to look into other options such as 3rd parties. Where we would gain scalability, we would loose some knowledge.
As an IT consultant who provides due diligence (DD) services, I’ve seen both in-house and third-party approaches work well, but the right choice really depends on several factors: resource availability, the size and complexity of the deal, and the overall maturity of the buyer’s M&A program.
When we work with clients on DD (especially for the first time), the buyer’s involvement is still significant. We rely heavily on input from internal stakeholders to tailor the scope, prioritize what data to collect, and interpret findings within the context of the buyer’s standards and risk tolerance. However, once the consulting team fully understands what the client values, how findings should be interpreted, and how results should be presented, the buyer’s day-to-day involvement typically decreases significantly. At that point, the consulting firm can operate much more independently, while still aligning to the client’s goals and risk profile.
In-house teams bring valuable context and long-term ownership, while third parties bring capacity, structure, and benchmarking from across deals.
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