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IT/Tech Due Diligence

Due Diligence McKinsey Private Equity
New answer on Nov 19, 2022
3 Answers
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Anonymous A asked on Nov 16, 2022

I have a last round interview with McKinsey for a position as EM.
My interviewer is a Partner with strong experience in IT Architecture, IT Due Diligence, and IT Strategy.

Given that I applied for the Private Equity Practice, I would like to prepare on how to run an IT DD.

Do you have any suggestion in how to structure an IT Due Diligence? Which items should I consider? 

Thanks
 

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Maikol
Expert
Content Creator
replied on Nov 17, 2022
BCG Project Leader | Former Bain, AlixPartner, and PE | INSEAD MBA | GMAT 780

First off, it is fundamental to clarify the situation. 
There is a big difference between an IT DD for a carve out (i.e., separation of a business unit from a larger business), an M&A and then integration of firms, and a PE fund just buying a company to keep it standalone or make it a platform for add-ons.

The first case is arguably the most complex one because you have to understand which IT services are provided by the larger business and which can be available standalone from day one or through agreements with the seller.

In any case, an IT DD has the goal to understand:

  1. Map of the systems used by the target
  2. Dependency between systems and with other players (outsourcers, sellers, other portfolio companies, etc)
  3. System readiness from day 1 after closing
  4. Level of digitalization across company functions (i.e., tools used by salesforce or accounting dept)
  5. The maturity level of those systems (i.e., Saas vs on-premise, need for upgrades, state-of-the-art development, frequency of updates, glitches/bugs)
  6. Total Cost of Ownership of those systems
  7. Investments needed to have a cost-effective IT infrastructure (and potential savings)
  8. People and IT organization needed to run the show

Good luck with your final round!

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Ian
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replied on Nov 16, 2022
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate
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Pedro
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replied on Nov 19, 2022
Bain | Roland Berger | EY-Parthenon | Mentoring Approach | 30% off first 10 sessions in May| Market Sizing | DARDEN MBA

I stongly doubt that you're going to get an IT DD as a case. But it doesn't hurt to have a look. I think the materials already provided should suffice.

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Maikol gave the best answer

Maikol

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BCG Project Leader | Former Bain, AlixPartner, and PE | INSEAD MBA | GMAT 780
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