Features of Pre-Investment Analysis of M&A Deals in the IT Sector

Анотація

The article is devoted to outlining the content, stages, and research methods of the pre-deal phase of M&A, with particular emphasis on their specific features in the IT sector. It analyzes the global and domestic IT M&A markets, identifies their development trends, and demonstrates their growing significance. Drawing on both successful and unsuccessful cases of mergers and acquisitions involving technology companies, the study substantiates the need for a clear organizational and economic rationale for such transactions, given the complexity of the process and the specific nature of the IT business. The main focus of the study is on pre-investment analysis, the results of which shape the subsequent stages of de jure and de facto integration and determine the overall effectiveness of the transaction. The stages and methods of the pre-deal phase are examined as a unified logical sequence and through the interrelationship of the initial synergy hypothesis, due diligence, business valuation, risk analysis, and the assessment of organizational compatibility. The article elucidates the specific features of substantiating the motives for M&A and the synergy hypothesis in the IT sector, where the principal source of synergies lies in the integration of intellectual capital. It also highlights the specific nature of due diligence in mergers and acquisitions involving technology companies: alongside legal review and the financial and accounting audit of intellectual property assets, technical and technological due diligence of technological systems, operational processes, and the technological platform is mandatory and requires an appropriate organizational framework. Particular attention is given to organizational due diligence aimed at assessing the compatibility of IT companies in order to mitigate the risks of losing key specialists and disrupting well-established engineering practices. The article also presents the main approaches to business valuation in the IT industry, outlining the specific features of determining company value using the DCF and ROV methods. In addition, it proposes a range of industry-specific market multiples for estimating the market value of technology companies depending on their core line of business. Typical risks inherent in the IT business are identified, and the fundamental principles for forecasting the synergistic effect of M&A in the IT sector are formulated.

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