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Overlooked M_A.jpgEvery now and then when I get a few minutes to myself I like to catch up on recent news. Frequently, what starts as a break from work turns into another lesson learned that I need to keep in mind when helping clients. For example, the recent suspension of President Trump’s Twitter account pointed out two areas that clients often overlook when contemplating a merger or acquisition. First, the ability of one rogue employee to suspend the account offers a stern reminder that even a tech giant like Twitter can have insufficient IT security in place to protect its users and data. Second, the desire of one rogue employee to give the company such a black eye points out that internal culture will play a critical role in the success of a merged company going forward.

Imagine your company had just acquired Twitter when these things happened. What steps could have been taken in the acquisition to make sure that a problem like this would not rear its head post-merger?

Information technology due diligence

The Trump Twitter fiasco points out just one small subset of the IT issues that need to be considered when acquiring or merging. If you were acquiring Twitter and performing IT due diligence, you would certainly want to review internal policies and procedures to make sure that no one employee had the ability to suspend an account as significant as the president’s.

Testing should also examine the security of firewalls and assess IT risks. Given the prevalence of malware and hacks in today’s business environment, it’s critical to make sure there is no existing undiscovered breach that can infect your systems once the two businesses are combined. Likewise, a pre-merger IT due diligence check for the acquirer should also be considered in order to make sure that neither party carries a legacy breach into the surviving business. 

The challenge of merging cultures

Many times, a merger looks so good on paper that management pushes forward without considering the most important intangible—corporate culture. In the case of the president’s Twitter account, an acquirer would need to ask if this was the action of one rogue employee thinking he was having fun on his way out the door, or is it an expression of anger toward the company shared by many of his co-workers?

Assuming you learn that the atmosphere inside the target is not toxic, the next question is whether the culture of the target is one that will blend well with yours to create a successful surviving entity. At HORNE, we know that our own profession can offer some striking examples of differences in corporate cultures. Our firm has grown by focusing less on billable hours and more on results. Our team members are empowered to work remotely on schedules that make sense for them and those who do come into the office are welcome to show up in business casual attire. We would be crazy to consider a merger with a firm that’s focused on billable hours with people required to spend much of their week in the office with little flexibility.  

While problems like IT due diligence and culture management are frequently overlooked when planning an M&A transaction, they are just two of the many challenges that a business faces as a result of the M&A process. Some HORNE services focus specifically on the two problem areas, such as:

  • IT due diligence
  • Reviews of IT risk assessment
  • Penetration tests
  • Evaluations of IT policies and procedures
  • Financial and feasibility studies
  • Business process integration support

Our M&A web page provides a more comprehensive list of the transactional support services that HORNE offers. To learn more about how HORNE can help you develop a successful growth strategy, please  .

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Caitlin Glover serves as an Assurance Supervisor at HORNE LLP. She provides assurance, internal audit and Sarbanes-Oxley consulting services to a number of public and middle market companies.