By JULIA DEIEN
In 2022, the construction industry experienced a surge in merger and acquisition activity in response to high demand and a shortage of experienced job candidates. When undergoing a merger or acquisition as a construction business, the technology due diligence process may not rank high on the to-do list, but it’s a vital process to strengthen cyber security, reduce redundancies and ensure a smooth transition. Construction companies are ideally positioned to invest in innovative technology, which can provide a competitive edge over others in the industry and add additional value to your business.
1) Take Inventory of Digital Assets
Technology is an important tool for the construction industry, from collaboration software that keeps communication lines running like a well-oiled machine to the nuts and bolts of physical construction technology that come in a variety of forms such as 3D printing prefabrication, robotics, digital mapping and other highly engineered materials.
Taking inventory of these assets can help an acquiring company understand the true value of the business it has acquired. Once M&A is complete, the newly combined company can then leverage these technologies, materials and equipment to scale up operations, even as disruptions like a skilled labor shortage rage on.
Construction clients are demanding more ease of access so they can be kept up to date about their project’s status. Digitization is one area where construction companies can set themselves apart from their competitors; the technology due diligence process can highlight where certain needs aren’t being addressed and allows companies to take this time to strategize about how to fill that need. While this may not add tangible value during the M&A process, it will increase the company’s overall value in the long term, fiscally and with the clients you serve.
2) Identify Redundant Technology
In the case of a merger with another existing construction company, there may be an overlap between the technologies both entities use. This creates an opportunity to review both companies’ technological assets and compare them against one another.
Perhaps Company A, which is in the process of acquiring Company B for the sake of this example, already has a form of collaboration software to allow communication between work sites, but it has been dissatisfied with it and was already looking into alternatives before any M&A activity began. Company B, on the other hand, has been very pleased with its software, which is far more complex than what Company A currently uses and offers more capabilities.
It’s a no-brainer for Company A to cancel its current communication software account and expand Company B’s to cover both entities. There may be pricing or expansion issues that could change that decision, which is why it’s essential to evaluate both companies’ technological assets to determine which assets will serve the newly merged business’ best interest.
3) Resolve Cybersecurity Vulnerabilities in Platforms and Processes
A rise in the number of cyber-attacks and an increase in the level of sophistication of these attacks has influenced businesses across a variety of industries to take preventative steps to keep their data, software and hardware protected from threats. While optimizing the future state of your company’s tech stack, it’s critical to ensure the platforms and processes that run on it are secured.
Partnering with a third-party technology-managed service provider (MSP) experienced in M&A at this stage in the process can help to identify vulnerabilities and develop solutions aimed at resolving them. For example, have all past employees been properly off-boarded, or is there a possibility that an ex-employee may still have access? The best time to address these security risks is before a merger or acquisition, but the second-best time is immediately after discovering it, even if it’s right in the middle of due diligence.
4) Align on Key Decisions Early
An MSP can also provide guidance on other concerns that often go overlooked during due diligence preparation, such as email domain migrations and whether to use cloud-based or physical servers.
Regarding email domain migrations, determine which company’s domain will ultimately be used after the transition is complete. While it makes sense for the acquiring company’s email domain to be used, there may be instances where the acquired company requires its own distinct email address in order to support branding efforts.
Managing hardware, particularly servers, may not be a priority for most construction companies but determining early on whether to utilize physical servers or use a cloud-based option can help minimize the disturbances a migration will cause. These are important considerations to make before the merger or acquisition is complete to ensure technology can be updated and migrations can start in a timely manner.
Before entering the due diligence process, take the time to examine your organization’s current technology as well as your technological needs to identify where you could encourage more growth by advancing your tech stack. Find a managed service provider with experience in the construction industry and who understands the challenges and opportunities facing the industry today.
Julia Deien, MCTS, is a principal and technology practice leader at Anders CPAs + Advisors. She can be reached at (314) 655-0163 or jdeien@anderscpa.com.