Effective due diligence: Focus on IT due diligence and PMI

published on 23 June 2025 | reading time approx. 5 minutes

Investors today require more than just a standardized due diligence – particularly IT and Post-Merger Integration (PMI) are gaining increasing importance. Using a real-world example, we aim to highlight the growing significance of IT and Post-Merger Integration (PMI) aspects in the due diligence process. Rödl & Partner recently advised a U.S.-based industrial holding company on the acquisition of a German mid-sized enterprise. The transaction was supported by an interdisciplinary team involving experts from finance, legal, tax, as well as IT and PMI.

Project Overview

The objective of financial due diligence was to establish a sound basis for decision-making. The focus was on both traditional topics relevant for purchase price determination – including adjusted EBITDA, net debt, and the working capital mechanism – and sector-specific requirements. A key aspect of the project was the demand for very detailed information and in-depth analysis of current trading and forecast scenarios to derive sustainable results in today’s highly volatile environment.

As the project progressed, structural and procedural issues increasingly came to the forefront, particularly those with high relevance to IT and Post-Merger Integration (PMI). In the finance/controlling area in particular, it became evident that outdated IT infrastructures and inefficient controlling systems would require significant attention post-transaction. The identified weaknesses had a direct impact on the economic valuation of the target company and, consequently, on the determination of the purchase price.

The insights gained were translated into precise, implementation-oriented recommendations, which significantly influenced both the structuring of the transaction and the purchase price determination. Building on this, key topics related to Post-Merger Integration (PMI) were identified and further pursued in an interdisciplinary manner.

Focus on IT Due Diligence and PMI Topics

A central component of the due diligence was the IT due diligence, which played a critical role in assessing and integrating the target company. The analysis of IT infrastructure and systems revealed outdated technologies and inefficient processes in the finance/controlling area that required urgent attention post-transaction. These weaknesses had a direct impact on the economic valuation and the purchase price determination

Especially in cross-border transactions and in cases of differing accounting standards between buyer and target, it is often necessary—already during the due diligence phase—to identify material differences in accounting and valuation, for example, with respect to lease accounting or revenue recognition.

Furthermore, addressing and planning the post-merger integration (PMI) early on sets the course for the post-closing phase and facilitates successful integration. The Finance & Accounting workstream is particularly important—not only due to its relevance for purchase price mechanisms, but also due to regulatory requirements such as disclosure obligations and internal report-ing needs after the closing.

Our detailed analyses led to precise, implementation-oriented recommendations covering several key areas:

Modernization of IT Infrastructure: We recommended renewing outdated IT systems to improve both efficiency and security. This included the implementation of modern ERP systems and improvements to network architecture.
Optimization of Controlling Processes: Measures were proposed to streamline controlling systems, including the introduction of automated reporting tools, cost center accounting, and improvements in data integrity.
Security Measures: Special attention was given to implementing robust IT security measures to protect the company from potential cyber threats.
Training and Upskilling: We provided recommendations for training employees in the use of new systems and processes to ensure a smooth transition.
Post-Merger-Integration (PMI): Key PMI topics were identified, such as the harmonization of IT systems and the integration of business processes to leverage synergies and enhance efficiency.

For Finance PMI, we addressed not only the conversion from German GAAP (HGB) to US GAAP but also issues such as the harmonization of management reporting, the shift from total cost to cost-of-sales accounting, and a potential change in the fiscal year-end of the acquired company.

These comprehensive recommendations ensured that IT and PMI aspects were factored into both the structuring of the transaction and the subsequent integration phase. The interdisciplinary collaboration enabled the identification and targeted follow-up of critical topics, thereby laying the foundation for successful integration.

Conclusion

Successfully supporting M&A transactions today requires much more than a traditional due diligence approach. This case study highlights that IT and Post-Merger Integration (PMI) topics must be incorporated early into the analysis process to identify risks relevant to the purchase price and to ensure operational efficiency after the transaction. An interdisciplinary advisory approach—combining financial, legal, tax, and IT expertise—not only provides transparency for investors but also establishes the foundation for a well-structured integration after closing.

It also becomes clear that investors—depending on their strategic orientation—have very different requirements regarding IT architecture, data quality, and the depth of integration. While financial investors focus on scalability and IT governance, strategic investors specifically seek technological synergies, particularly in terms of ERP and CRM systems as well as the underlying infrastructure. Outdated systems, security vulnerabilities, or a lack of IT governance can lead to substantial follow-up investments for investors. A flexible, scalable, and easily integrable IT architecture is therefore essential—especially for rapid add-on acquisitions and a smooth post-merger integration.

Moreover, a professionally designed IT infrastructure with clearly documented processes increases transparency in a future exit and can have a value-enhancing effect on the purchase price. As such, IT due diligence should be viewed as an integral part of the overall transaction process—with the goal of minimizing risks, unlocking value potential, and laying the foundation for a successful post-merger phase.