1. A buy-out involving the separation of a subsidiary (the Newco) from its parent will usually require the separation of corporate IT services that have historically been provided by the parent to Newco. These will typically include the wide area network, Internet and email services, payroll, help desk functions etc. Furthermore, Newco’s IT infrastructure, software licences, other third-party supplier relationships and many of the human resources in the IT function may be owned by the parent; provision may need to be made by Newco for the re-assignment of licences (if possible), the procurement of new systems and the recruitment of new IT skills. In these circumstances it is vital that ownership of all IT systems and services, upon which Newco’s business will depend, is confirmed as a precursor to deciding what separation measures need to be taken. A detailed separation plan, produced and underwritten by both parties, should then be drawn up prior to deal completion, together with a governance structure that will ensure all parties remain committed to implementation of the plan thereafter. Newco must take responsibility for driving these activities and remember that, no matter how good the historic relationship with the parent, these relationships and the parent’s priorities will inevitably change once the legal separation has completed.
   
   
2. As the term implies, expansion (or development) capital is all about enabling the growth of the investee’s business, typically expressed in the business plan in terms of new products, new markets and geographical expansion to drive increased turnover and profitability. For traditional businesses (for example, those in the manufacturing and retail sectors) the company’s IT strategy, IT infrastructure and systems must be designed to support this growth if expensive and disruptive technology refresh projects are to be avoided. Technology businesses (for example, software providers) will be more concerned with the scalability of their products’ software architecture and the robustness of their development and testing processes (as weaknesses here will certainly impact future product reliability). In both cases, high-growth companies will need an IT or technology function that has the capability, and ideally the experience, to overcome the challenges of business expansion.
   
   
3. Investments in technology businesses (further examples might include developers of laser technology, IP telephony systems, integration software, video streaming technology etc.) will inevitably require an assessment of both the scalability and robustness of the company’s technology operations (as above) and the market for the technology product itself. Future or ongoing commercial success will depend upon market demand, product innovation and differentiation, barriers to entry and protection of intellectual property. Because the technology is intrinsically linked with the market, both will need to be considered as part of the technology due diligence process.

Of course, not all subsidiary companies are integrated with their parents and not all investments are in growth businesses. Clearly, though, the type of transaction will influence the scope of the IT or Technology Due Diligence Assessment.