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Selling your business: IT audit will be part of buyer's due diligence

By Generational Equity

IT Due Dilagence

A complete review of a company's IT processes and systems is a growing trend in the due diligence process required prior to the sale of a company. Business owners who do not take IT security into account may wind up receiving less money for their enterprise or face a reduced list of prospective buyers willing to review their opportunity due to the IT-related risk.

"Keep in mind that more and more professional buyers are adding IT policies and security procedures to their standard due diligence protocol," said Terry Mackin, Managing Director of Mergers & Acquisitions with Generational Equity.

"This means that if you are considering exiting your business in the next few years, getting your IT policies, systems and procedures, especially as they relate to security, fully up to industry standards will be critical."

"In past years, buyer due diligence focused largely on the financials, operations, marketing, sales and HR of the target company," said Carl Doerksen, Director of Corporate Development for Generational Equity.

"Today there is a growing trend to have due diligence encompass IT because buyers are realizing that the company they are acquiring is only as strong as the weakest link in its IT system."

"For this reason, as we are working with our clients to prepare to take their company to market, we are encouraging them to re-double their cyber securityefforts to ensure their computer systems are protected with solid firewall, malware and virus software policies in place," added Doerksen.

According to a recent study conducted by the Ponemon Institute sponsored by IBM, the cost of a data breach is currently estimated to run as high as $4 million on average, an increase of 29% since 2013.  While large data breaches receive the most publicity, the reality is no business is safe from unwanted attacks, no matter how small the company or what industry it is in.

"If you are lax and lazy with your computer controls, at a minimum you are open to an attack. Even worse, when you sit down with a buyer, their concerns in this area could kill the deal or be taken into account when determining what they are willing to pay for the business," said Mackin. "The last thing a buyer wants to acquire is a company with an antiquated IT system that is full of holes that hackers can enter. The liability is just too great."

Even if you are never attacked, having a policy in place that clearly outlines how you are protecting your company and key data will give buyers more confidence that not only are they buying a solid, well run business, they also are not going to wake up one day and find that all of the data they have acquired has been compromised.

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We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.
Michael J Polarek, President, Paragon Packaging
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”
Karen S. Williams, CFO, BW Manufacturing
We thank you Eric and Generational Equity making our dream come true.
Larry Moore, Owner, A Company Portable Restrooms
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.
Larry Moore, Owner, A Company Portable Restrooms
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.
Karen S. Williams, CFO, BW Manufacturing
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.
Terry D. Wickman, President, Keytroller
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).
Bil MacLeslie, CEO, ipHouse
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.
Robert Evans, President and CEO of Mealtracker Dietary Software
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.
Michael J Polarek, President, Paragon Packaging
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.
Pete L.
Generational Equity’s assistance was invaluable in compiling and marketing our business.
Bil MacLeslie, CEO, ipHouse
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.
Jay Dinnison, Owner of Sharpe Mixers
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!
Andy Graham, Vice President, Modern Heating & Plumbing
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.
Andy Graham, Vice President, Modern Heating & Plumbing
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.
Bil MacLeslie, CEO, ipHouse
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.
Robert Evans, President and CEO of Mealtracker Dietary Software
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.
Ralph Noblin, President of Noblin & Associates
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.
Jay Dinnison, Owner of Sharpe Mixers
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Terry D. Wickman, President, Keytroller