How to Uncover IT Risks During M&A: A Guide for Private Equity Firms

In private equity and mergers and acquisitions, identifying hidden risks is essential to protecting value. While financial, legal, and operational due diligence are standard practice, IT often gets overlooked. Yet it’s one of the most volatile areas of risk, capable of disrupting integration, adding unplanned costs, and exposing your portfolio to compliance or cybersecurity issues.

This guide explains how to uncover IT risks during M&A and why every PE firm should make IT due diligence a standard part of the deal process.

Why IT Due Diligence Matters in M&A

Every modern business depends on technology, from cloud infrastructure to data analytics. That means every acquisition carries IT risk, whether visible or hidden. Neglecting IT due diligence can lead to expensive surprises and stalled integrations.

Common IT Risks in M&A

• Unsecured or non-compliant systems

• Unsupported or outdated infrastructure

• Poor IT governance or missing documentation

• Vendor lock-in or shadow IT environments

• Limited internal IT expertise

• Systems that cannot scale with growth

Undetected IT risk leads to higher post-close remediation costs, longer integration timelines, and a direct hit to IRR.

Step-by-Step: How to Identify IT Risks During M&A

1. Begin IT Due Diligence Early

IT reviews often occur too late—after the letter of intent or even post-close—when renegotiating or mitigating issues becomes costly. Start initial IT discovery as soon as a target becomes viable, and expand it into a full assessment during the diligence phase.

2. Conduct a Comprehensive IT Environment Review

Assess both technical and operational dimensions, including:

• Infrastructure: On-premises servers, cloud environments, and networking

• Applications: ERP, CRM, custom software, and licensing status

• Cybersecurity: MFA, endpoint protection, firewalls, and backups

• Compliance: HIPAA, NIST, SOC 2, or other relevant frameworks

• IT Staff & Vendors: Skill sets, contracts, and key-person dependencies

• Processes: Incident response, documentation, and onboarding procedures

Look beyond technology—evaluate how systems are managed, secured, and governed.

3. Evaluate Technical Debt and Scalability

Even functional systems may not support future growth. Warning signs include:

• Aging or unsupported systems (e.g., Windows Server 2012)

• Manual workflows where automation should exist

• Inflexible infrastructure that resists scaling

• Redundant platforms from past acquisitions

Technical debt increases post-close costs and delays synergy realization.

4. Identify Cybersecurity Vulnerabilities

Cyberattacks on mid-market firms are rising, and newly acquired companies are prime targets. A breach shortly after close could trigger regulatory fines, data loss, and brand damage.

Evaluate whether:

• MFA is enforced across all systems

• Devices are centrally managed and patched

• Data is encrypted and securely backed up

• Vendor access is controlled and audited

• Users receive regular cybersecurity awareness training

5. Assess IT Governance and Documentation

A well-managed IT environment requires clear governance and documentation. Missing or outdated policies create long-term operational risk.

Confirm the presence of:

• Acceptable use and password policies

• Asset inventory and lifecycle tracking

• Documented network and application diagrams

• Defined IT roles, responsibilities, and escalation paths

The more structured the governance, the smoother the post-close transition.

6. Engage a Third-Party IT Due Diligence Partner

Deal teams often lack the technical expertise to assess IT risk comprehensively. A third-party managed service provider (MSP) experienced in M&A can provide:

• Objective assessments and rapid turnaround

• A risk matrix with prioritized findings

• Remediation timelines and cost estimates

• Post-close integration and scalability recommendations

An experienced MSP can also help map an IT roadmap for value creation beyond the deal close.

What Happens If You Skip IT Due Diligence

Skipping IT diligence exposes PE firms to:

• Unexpected capital expenditures to replace failing systems

• Missed compliance issues leading to fines or regulatory delays

• Acquisition of outdated or redundant tools

• Integration difficulties with existing portfolio companies

• Reduced exit valuations or buyer confidence

Overlooking IT risk can turn a profitable acquisition into a costly liability.

Final Thoughts: Make IT Risk a Core Part of Every Deal

IT due diligence is about more than technology—it’s about operational performance, security, and scalability. In a digital-first business environment, neglecting IT during M&A is like buying a company without checking its foundation.

For PE firms focused on long-term value creation, IT risk assessment should be a required step in every deal checklist.

Need Help Uncovering IT Risk?

Our team specializes in IT due diligence and post-close IT transformation for private equity firms. We deliver fast, actionable assessments that help protect deal value and prepare portfolio companies for growth.

FAQ: IT Due Diligence in M&A

What is IT due diligence in M&A?
IT due diligence evaluates a target company’s technology, infrastructure, and cybersecurity posture to identify risks and integration challenges before acquisition.

When should IT due diligence occur in the deal process?
IT due diligence should begin during the early evaluation phase—ideally before signing the letter of intent—to avoid costly surprises later.

Who should conduct IT due diligence?
While internal teams can handle preliminary reviews, partnering with a third-party MSP experienced in M&A ensures deeper technical insights and unbiased findings.

What are common red flags in IT due diligence?
Outdated systems, missing documentation, poor cybersecurity practices, and lack of governance are major indicators of elevated IT risk.

How does IT due diligence impact post-close success?
Comprehensive IT due diligence shortens integration timelines, reduces remediation costs, and ensures that the acquired company can scale securely and efficiently.