As of 1.5.2022, our consulting unit has signed a cooperation agreement with Cape of Good Code GmbH for the joint execution of software and technology due diligence services for M&A transactions. The aim of the cooperation is to use the DETANGLE analysis software developed by Cape of Good Code in digatus’ IT M&A business area. The growing demand for technology/software due diligence in M&A deals shows the increasing importance of software for the valuation and sustainable success in the acquisition of software-dependent business models.
- IT M&A
- IT carve-out
- IT Due Diligence
- project management
- Microsoft 365
- Software development
- IT Audit
- Contract & License Management
- Process Mining
- process management
What company is not familiar with this situation? A software product is quickly needed and downloaded – thus purchased under fully licensing regulations. In the background, the general terms and conditions and licence conditions are accepted with a mouse click and the horror begins for every SAM compliance officer in the company.
The successful separation of a part of a company from a corporation requires a comprehensive understanding of the complex interrelationships and processes. Especially in the service sector, IT plays a central role due to the high delivery pressure, degree of automation and the close interdependencies of the systems used. A target-oriented approach is therefore required for timely separation and the development of new infrastructures in order to ensure operational capability in every transition phase and avoid production downtimes.
In the context of IT Carve-Out projects, four key scenarios in which the use of Microsoft 365 solutions on the target side should be considered. On the one hand, the licenses can be scaled up well and no own IT know-how in the company is necessary for the use. On the other hand, Microsoft 365 solutions offer a high level of data protection, disaster recovery, backups, and investment protection for server hardware.
A real blueprint for digatus – an order on which we were able to demonstrate our skills as a full-service IT service provider: the complete carve-out of a future SME company! The scope included the project management and execution of the IT carve-out in relation to the entire infrastructure, the non-SAP applications and the SAP system as a split copy from a corporation, as well as the gradual transition to digatus operation at our Augsburg data centre. With this full-service separation and transition in a short space of time, it was crucial to act quickly and in a structured manner, implement solutions tailored to the needs of the target as a future independent SME and to keep the three parties on the project team on the same track. Together with our SAP partner firms aplicado GmbH and Trigon Consulting GmbH & Co. KG, we were able to manage this project successfully.
Whether the business case of an M&A deal or divestment is successful or not depends on numerous factors. One often underestimated aspect is the design of the Transitional Service Agreement (TSA). Due to complex processes and company-specific dependencies, especially in the areas of IT, HR and finance, the outsourced unit (target) is usually not able to act independently from the beginning (Day1). Especially in the case of group spin-offs, it still needs support from the seller side for a transitional period in order to maintain the business operation. What this support should exactly look like is specified in the Transitional Service Agreement, which is concluded between the seller and the buyer and which usually has a term of about six to twelve months. Anyone who thinks that the parties will surely agree as the transitional time is so short, is mistaken. Our experience shows that a regular transition period, during which the outsourced unit can access the usual services as long as necessary in order to establish their own processes in parallel, in line with the new challenges and goals, is decisive for the successful start into independence and prevents time- and cost-consuming disputes between the parties. So, what shall be considered when designing a successful TSA?
The successful spin-off of a part of a company from a group requires a comprehensive understanding of the complex interrelationships and processes. Particularly in the manufacturing sector, IT plays a central role due to the high degree of automation and the close interconnections and dependencies of the systems used. The timely separation and establishment of new infrastructures therefore requires a goal-oriented approach to ensure operational capability in every transition phase and to avoid production downtimes.