Effective IT Increases Corporate Valuation


Is technology adding to the value of your business, or decreasing it? That’s the question more and more CEOs and business valuation experts are asking today. For years, IT Due Diligence, as part of an M&A transaction or other business valuation, was simply an add-on to the accounting audit. But with IT playing a much more critical role in the operational efficiency and performance capacity of businesses today, the industry is taking note.

According to Stan Mork, president of the Information Technology Alliance, “Including IT in the due diligence process not only protects your investment dollars, but optimizes investment performance post-transaction.” Technology systems have become more complex and more critical to successful daily operations of most companies. Whether they are planning to sell their business or not, CEOs are wise to consider how effective IT can add value to their business and how non-performing IT can destroy it.

Of course, building and maintaining an effective IT organization isn’t always easy, especially if it has been neglected for years. Many CEOs question whether it’s worth putting their company through the pain of change that IT sometimes requires.

Larry Butler, CEO of Butler Capital, completed the successful sale of his life’s passion to a venture capital firm a few years ago. The economic downturn had been particularly hard on the financing industry and on Butler Capital, but their strong customer relationship base, a talented workforce and solid financials meant that his company still reflected significant value in the marketplace. Butler had recently completed an enterprise software upgrade and transition. Given the rapid change that was happening within the industry and Butler Capital, the upgrade had proven challenging to both employees and management. When asked if it was worth the pain and disruption to his company, Larry said, “Had we not implemented that new professional software system, we never could have found a successful buyer.”

And there it is – the only answer that really matters when it comes to whether the pain is worth it. CEOs endure the pain because it helps improve the capital valuation of the company. While efficient systems, workflows and processes may create competitive advantage and improve the bottom line, the lack of professional systems can put your company at a competitive disadvantage and can potentially devalue it. Effective data analysis systems, efficient customer acquisitions solutions and automation of core business processes can even dramatically increase the value of a company.

Our last big economic downturn makes it even more important to conduct a comprehensive IT Valuation, even if you aren’t planning to sell your business or acquire another. Technology firms, software vendors and hardware manufacturers went through the same hard times as everyone else—you need to know that they still stand on solid ground, that they haven’t been devalued. An effective and independent IT evaluation will not only help you ensure you have the software systems, people, processes and technology to drive greater efficiency and performance, but may add to the overall value of your business.

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