#261: The Role of a Company’s Technology and Infrastructure in Mergers and Acquisitions

The IT infrastructure of a business isn't usually what gets entrepreneurs jazzed up, however it can have an outsized impact on the risk of a company as well as a company's ability to scale. This episode is a crash course in how to manage, grow and update your IT infrastructure so it's a valuation enhancer, instead of a detractor. If you're not willing to invest in your IT infrastructure, you're asking your potential buyer to do so. How do you think that's going to affect your deal?

It is incredibly important to understand the role IT infrastructure plays in mergers and acquisitions — whether you're on the sell side or the buy side. Our guest today not only sold the IT company he started after 27 years, he also handled the six-company integration afterwards. Jake knows a thing or two about IT infrastructure and integration. Listen in as he takes us through the reasons why you should be doing technology-fueled mergers and acquisitions.

What You Will Learn In Today's Podcast Interview

The value of technology-fueled mergers and acquisitions
How IT is viewed by the buyer and seller during due diligence
Why cutting corners on your IT infrastructure could detract from the value of your business and increase risk
Ways to think about your IT if you're looking to sell in the near future
The impact acquiring a company has on your IT's infrastructure and how to plan for the extra capacity
How a company's IT fits into post-transaction integration
Why saying ‘no’ to upgrade requests from your IT person can hurt the value of your company
The value of technology-fueled mergers and acquisitions
What a security fortress is and why you need one
How to determine if your IT vendors are truly partners contributing to your long-term goals or simply selling you products and services to make bank
The benefit of having an infrastructure and application technology road map
How much IT integration costs, including the impact it has on your team
When to replace your IT person and how to evaluate their impact
Why your current IT infrastructure is holding you back and what you can do to fix that
How to avoid security threats in the modern technology market and mitigate IT costs
It’s not just data you’re protecting, it’s your entire livelihood

Are You Growing The Value of Your Business

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Are your company's current initiatives intentionally designed to increase the value of the business?
Do you know what you want from your business long term and why?
Do you know what your company is worth?
Do you know the differences between Management, Family Transitions, PE Firms, ESOPs and Strategic Buyers?
Does the business have a written strategic plan on how to achieve the desired normalized EBITDA and valuation?

About the Guest:

Jake Kent is a Navy veteran, entrepreneur, and founder and CEO of two fast-growing information technology companies, JCMR Technologies and Chief Acquisition Lifeguard. In 2000, he sold JCMR after 27 years and helped with the six-company integration that followed. Jake has also previously started a bank, which gave him more insight on the IT securities market. Jake made it his mission to help CEOs view technology as a core feature of successful acquisition strategies by teaching them how to build a technology-fueled M&A plan. He is also committed to the community and has participated in many charitable events. He is a founder of the Matthews-Mint Hill Optimist Club and a Board Member of the Ballantyne IT Professionals Non-profit as well.

Quotes:

04:48 - “If anything can go wrong, it’s going to be the technology.” – Jake Kent

12:51 - “Everything’s viewed as an expense if they don’t know this whole concept of normalizing EBITDA and multiples.” – Ryan Tansom

14:39 - “So the first one is really looking at the afterthought and not thinking about technology and how technology can enable your business and drive your business, increase your customer experience and things like that.” – Jake Kent

17:32 - “If you haven't invested in enough training to help that person make that transition, they're going to really struggle.” – Jake Kent

21:07 - “They go into this larger organization with expectations that it’s going to be much better and it’s way worse because they don’t actually have the capacity to actually onboard all of those resources.” – Jake Kent

29:33 - “The money’s going to be spent, regardless. It’s more about who’s going to spend it.” – Ryan Tansom

33:03 - “Users don’t like change.” – Jake Kent

39:03 - “Their cyber security did not cover all of the costs associated with getting them back up and running.” – Jake Kent

41:41 - “That is the most frustrating thing that I’ve personally run across, is to have someone with no enterprise experience, no executive communication skills, and tries to do everything on the cheap because they’re scared to ask their boss for money.” – Jake Kent

43:35 - “It’s a cost of doing business.” – Jake Kent

43:54 - “Hey, we're going to have technology-fueled growth, and we're going to leverage technology to actually automate processes, reduce our overall costs associated with doing business.” – Jake Kent

44:50 - “The CEO and CFO, they don’t know how to interview an IT person.” – Jake Kent

45:55 - “You’re trying to tap into CIO-level thinking.” – Ryan Tansom

46:48 - “There is an application technologist that grew up in the application world, and then there is an infrastructure technologist that grew up in the infrastructure world.” – Jake Kent

50:08 - “The via leans one of two ways: It either leans toward the manufacturer and the manufacturer gets as much gear or as much software as they can into this company at the highest profitability.” – Jake Kent