Why IT Due Diligence Is the Game-Changer in UK M&A Deals

IT Due Diligence in mergers and acquisitions isn‘t just a tech check-up anymore—it‘s a deal–maker or breaker. For UK professional services accountants and finance functions, what separates a smooth, value–creating transaction from a costly post–deal headache often rests on IT.

UK dealmaking is on the rise again. In the first half of 2024, mergers and acquisitions in the UK totalled around £68 billion, up from £41 billion the year before—a 66% jump—driven largely by private equity deals focused on tech-heavy companies, according to PwC UK.

Buyers aren’t just acquiring businesses anymore—they’re investing in systems, software, and cyber controls too. Weak IT can halt—or even derail—a deal. It’s no longer just about the numbers. IT is now one of the most important parts of the deal—and that’s where due diligence really needs to dig deep.

Tech and software deals now top £13.2 billion across 420 transactions, a 27% increase year‑on‑year, according to City A.M. And with AI, cloud, and cybersecurity at the forefront, there’s never been a more critical moment to ensure IT is thoroughly assessed before signing on the dotted line.

While monetary warning signs are evident in the numbers, IT threats typically lie buried very deeply within the systems—out of sight until too late. That’s where the big issues reside.

• Cyber vulnerabilities and data breaches

A Forescout survey revealed 62% of companies face significant cybersecurity risks in M&A—leading to takeovers being trimmed or priced down. A real-world example comes from TalkTalk, which suffered a breach affecting over 150,000 customers during a period of strategic review. The resulting £400,000 ICO fine and reputational damage disrupted acquisition interest and showed just how high the stakes can be when cyber due diligence is overlooked.

• Unsupported legacy systems

Take ageing servers or finance software discontinued by vendors. They may “work now,” but subsequent to the purchase the buyer receives inherited unsupported technology. That is, no patches, growing cyber exposure, and an expensive forced upgrade.

• Concealed licensing and vendor commitments

UK professional services firms often employ SaaS, cloud, or specialist IT software. Termination fees or renewal spikes might be hidden in licensing agreements—or outdated agreements. Without IT due diligence, buyers might face six–figure unexpected costs.

• Data protection and GDPR exposure

In the UK, GDPR incompetence is not just a fine (€20 million or 4% global turnover). It can unravel a deal. ICO explains that “data sharing needs to be part of due diligence“—lawful basis, governance, and documentation.

Understanding what to look for is half the battle. These are the core building blocks of successful IT due diligence—each one critical in identifying risk, protecting value, and making integration easier.

• Infrastructure & Asset Review

Assess the health, age, and scalability of physical and virtual IT assets. Are systems cloud-ready? Are there performance bottlenecks?

• Cybersecurity Posture

Examine past incidents, current protections, policies, and incident response capabilities. Ensure the target isn’t a ticking time bomb.

• Software & Licensing

Understand what’s owned, what’s leased, and where risks or costs lie in vendor contracts. Shadow IT is often the biggest surprise.

• Regulatory Compliance

Especially under GDPR, data handling, storage, and sharing practices must be assessed for legal exposure.

• Data Governance

Evaluate access controls, audit trails, and backups. Can the business recover from a disaster—or a ransomware attack?

• IT Team & Third Parties

Who keeps the lights on? Are key skills in-house or outsourced? Are third-party suppliers stable?

Focusing on these six areas allows acquirers to build a reliable, risk-adjusted picture of the company’s IT landscape—so decisions are based on clarity, not assumptions.

In January, Reuters reported that senior cyber threats are currently “nonnegotiable“ elements of M&A analysis. They warned: “Effective cybersecurity due diligence is about verifying … cyber posture, data privacy and risk management.”

Why the rush?

• Market hesitation: Deals with low IT risk profile are more likely to be withdrawn.
• Valuation uplift: Low cyber risk profile payers pay more and retain value longer.
• Strategic buying: Private equity and acquirers prefer low-risk targets—only investing new tech money in the game if the foundations are solid.

Consider the failed KKR‑Thames Water bid. Despite a 270‑page turnaround plan, KKR pulled out—citing technology complexity and political sensitivity. Not just financial risk, but IT compliance, infrastructure scale, and environmental data systems all factored in—or blew the valuation. You can read more in this detailed report from Reuters.

We don’t lack hard evidence proving how IT problems affect UK deals.

In 2024, private equity firm HG Capital walked away from a purchase deal for a SaaS payroll platform after discovering unpatched security flaws and a lack of disaster recovery planning. The IT risk wasn‘t noted on the balance sheet—but was strong enough to bury the deal.

Similarly, a UK accounting practice guiding the acquisition of an HR consultancy firm in a regional consultancy arena encountered legacy software dependencies on unsupported servers. The unplanned upgrade and consolidation cost added over £400,000 to the post-deal costs—close to 12% of the acquisition price.

On the positive side, one of the London-based MSP-enabled deals succeeded because the acquirer collaborated with a technical due diligence company in advance. The acquirer obtained negotiating leverage to renegotiate the price and budget for seamless post-deal IT integration.

Lesson learned? Presence or absence of sufficient IT due diligence largely dictates deal success or failure. It leads to renegotiation, withdrawal, or success depending on what is uncovered and when.

Managed IT partners like Blue Saffron provide broad, hands-on experience that commercial and finance teams often do not have. We act as an extension of your deal team —helping you identify risks early, protect value, and prepare the business for a successful transition post-deal.

Here‘s how we do it:

• Pre-deal IT health checks – We examine infrastructure, software, licensing, and cyber hygiene prior to deal closure. This reduces the potential for post-deal surprises.
• Cybersecurity due diligence – Our specialists identify vulnerabilities, policy gaps, and threat history. Should there be a risk of breach, we‘ll quantify it.
• IT cost and liability modelling – We help clients uncover hidden IT costs in contracts, support, or vendor agreements and calculate future spend.
• GDPR and compliance assessments – From data mapping to governance checks, we maintain the business is safe from exposure to regulation.
• Integration strategy – Whether the objective is team merging or separating IT, we build a model for rapid, secure integration.
• Post-deal managed services – After the deal, we provide day-to-day IT operations, cybersecurity protection, user support, and optimisation.

Whether you’re an accountancy firm advising clients or a business exploring a target, we make sure IT is never the blind spot that sinks the deal—or the cost centre that devours value.

IT Due Diligence is still new territory for many accountants—but it’s a massive opportunity to increase the strategic value of your firm. Here‘s how you can set the tone:

1. Bake IT into due diligence checklists: Make IT just as much a priority as finance and legal. Include cyber posture, legacy risk, licensing, and integration.

2. Educate clients earlier: Acquirers and sellers always underestimate IT complexity. Utilize case studies and facts like the HG Capital and HR consultancy example.

3. Bring in IT specialists: Don‘t rely on internal teams for comprehensive due diligence. A partner like Blue Saffron will recognise unseen risks and costs others tend to ignore.

4. Chart post-deal planning: Even if your client’s IT appears tidy, prepare them for integration with managed IT support and compliance.

This has nothing to do with becoming an IT guru—it‘s about recognising risk in advance, enabling improved decision-making, and enabling smoother handovers.

IT Due Diligence is not a technical afterthought—but a crucial component of deal-making. For UK accounting practices, getting this—and working with the right IT specialists—is a winning value-add.

Blue Saffron is ready to help you stay ahead—keeping deals on track, value intact, and clients delighted. Get in touch with our team to start a conversation about how we can support your next deal.