Archive for the ‘Supply Chain’ category

IT Contracts – Due Diligence

October 28, 2008

 

A Slight Misunderstanding

 

In one acquisition, a domestic technology outsourcing company was contracted to provide key IT services through a twelve month transition period.  Upon signature of the acqusition agreement, the integration transition team asked for the IT equipment access credentials.  The outsourced service provider, a well know M&A services leader, refused to provide the credentials.  The problem turned out to be a difference in interpretation of the contract agreements by the IT service provider subcontractors, also well known industry leaders.   The acquired company spent the next four months renegotiating the contract and the subsequent release of equipment access credentials. 

 

A review the transitional services contract revealed vague contract language with no enforceable service level agreements or “exit” clauses.  The acquisition company management team implemented a successful strategy of appointing key staff members to review all service requests and develop direct line relationships with the subcontracting IT service provider to ensure delivery of services.  The acquisition company had several large contracts with the subcontractor and had considerable financial leverage in driving service delivery.

 

Lesson learned:

 

All misunderstandings concerning contract specifications will eventually be resolved.  The best time to do that is before the acquisition agreement is signed. 

 

Tip: Hire dedicated IT contract M&A specialists to review, negotiate and (re) write all IT contracts prior to acquisitions. 

 

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Supply Chain Management

October 5, 2008

It is essential to perform an assessment of the supply chain efficiency during the due diligence phase of the merger and acquisition process. The target company will probably not support the overall merger/acquisition goals.

   Tip: Set up an independent M&A supply chain.

In a recent acquistion, the buyer chose to use the target company staff and processes to acquire equipment and services. During the implementation of the project, every infrastructure project manager, the program manager and work stream leader noted the ineffective supply chain and sourcing of equipment and services. Delays of 60 days were the norm. The merger teams discussed the issue and agreed the delays were rooted in cultural inertia in the target company.

Establishing an efficient independent supply chain prior to the acquisition will ensure timely delivery of resources, equipment and services.

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