In mergers and acquisitions, legal counsel is often tasked with identifying liabilities, validating contracts, and securing regulatory approvals. However, one of the most material areas of risk—and frequently the most overlooked—resides in the target company’s information technology infrastructure. For this reason, Chief Information Officers (CIOs) must be given a central role in the due diligence process.
As an advisor, I have witnessed firsthand the aftermath of M&A deals where IT considerations were deferred until post-closing. The result? Unexpected audit demands, costly system integrations, cybersecurity vulnerabilities, and the painful realization that duplicative software licenses or outdated infrastructure have quietly inflated acquisition costs. These are preventable issues—if CIOs are involved early.
Legal and Financial Risks Embedded in IT
The due diligence process traditionally centers on financials, contracts, HR matters, and litigation exposure. But in today’s digital economy, the most valuable—and volatile—assets are often digital. CIOs are uniquely positioned to:
- Inventory and assess hardware, software, data centers, and digital assets
- Evaluate cybersecurity readiness and regulatory compliance (e.g., GDPR, HIPAA, CCPA)
- Identify triggers for software license audits, especially from vendors like Oracle, SAP, and Microsoft
- Analyze support and cloud service contracts for termination clauses or cost escalators
- Quantify tech debt and future capital investment needs
Omitting this analysis invites avoidable liability. For instance, a standard Oracle licensing agreement includes clauses that treat mergers as audit triggers. Without proper review, the acquiring entity may inherit audit risk or be forced into an unfavorable relicensing event.
Integration Without Insight Is a Liability
Beyond risk mitigation, CIOs can unlock strategic value. They identify IT redundancies, propose rationalization of vendors, and develop integration roadmaps that preserve business continuity. This input is critical to synergy realization and long-term ROI.
In contrast, deals that proceed without CIO input often require costly remediation, integration delays, and—ironically—legal intervention to clean up contractual oversights.
Counsel and CIOs: A Strategic Partnership
Attorneys overseeing M&A transactions would be well advised to elevate the CIO’s role in the diligence process. Not merely as a technical resource, but as a strategic advisor who can uncover latent risks and unlock real value.
Just as we scrutinize indemnification clauses and rep & warranty insurance, we must scrutinize cloud agreements, cybersecurity audits, and the scope of software licenses. The CIO is not ancillary to this work—they are essential.
How Palisade Compliance Can Help
At Palisade Compliance, we partner with CIOs and legal teams to bring clarity, confidence, and control to the M&A process. From software license assessments and audit risk mitigation to vendor contract reviews and post-close planning, our team of former Oracle insiders and licensing professionals helps you navigate these complex waters. If you’re a CIO staring down the risks of a transaction—or an attorney advising one—Palisade Compliance can help you make informed decisions that protect value and reduce exposure.
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