Spring 2014 issue of Horizons

FEATURE

recommended. The page rank indicates the relevance of a website’s content. The higher a site is ranked, the more relevant it is considered and the greater the likelihood it will be listed in search results. How secure is the website? Security is becoming a paramount concern and a “high-jacked” website can lead to problems from reputational loss to loss of confidential information. Checking for a current security certificate and encryption is important. Point of View RubinBrown’s experience with middle-market deals and deal makers is that few buyers want to take the time and resources to perform IT due diligence on an acquisition. We have seen many examples where IT due diligence has identified deal issues that have to be overcome either pre- or post-deal. Deal makers don’t like surprises. IT can be a source of bad surprises. IT due diligence can help identify what those surprises might be and evaluate an action plan to deal with them. It is rare that IT due diligence is performed on a middle-market company where risks aren’t identified. Some of those risks include: Insufficient licenses Will we be subject to fines for unlicensed software? Has Microsoft performed an audit recently? Is legal reviewing the contracts? No validated security protocol What level of protection over company data is in place? What is needed? Lack of IT spend Has the IT spend been so limited that necessary upgrades haven’t been done? Technology cannot scale If the entity is expected to be a platform company, will the core systems (ERP) support the volume and diversity of transactions?

during due diligence, if the company’s systems are going to be capable of providing such information. If the systems are not, the financial buyer will want to incorporate system upgrades into their financial models. Additionally, if the target company is going to be utilized as a platform for other acquisitions, a buyer will want to know whether the systems will be sufficient to accommodate additional businesses being rolled in. The answers to these questions can have a dramatic impact on the economics of the deal and can be reasons to walk away from a deal or renegotiate the purchase price. Web Presence More companies’ websites are becoming strategic assets. Depending on the business model of the company, the website can range from outward representation to the world to a critical revenue-generating engine. Therefore, due diligence of a company’s website should be part of a comprehensive IT due diligence plan. Some considerations are: Who owns the website? This may seem like a straight forward question, but companies can farm out ownership of their website to a third party. If this is the case, a check of other internet (IP) addresses owned/run by the third party should be performed. How much traffic is the website getting? The owner of the website may claim certain traffic figures, but how accurate are those numbers? Tools are available to give you an independent estimate of actual website traffic. Is the website search engine optimized? With search engines driving the majority of visitors to websites, one small tweak in search engines’ algorithms could impact the page rankings of poorly optimized websites.

While performing due diligence, a check of Google’s page rank for the site is

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