Due diligence in ICT market

Challenge:

What are the strengths, technological capabilities, and business environment of a potential partner?

Our client is a leader in the area of IT infrastructure management, data transmission, collocation and hosting. The company was planning to take over another company in the area of its operations. They needed the support of an independent advisor who had to assess the key parameters needed to make business decisions and to carry out the transaction. A team of our experienced consultants was tasked with conducting this complex due diligence in ICT market.

The ultimate goal of the project was to help the client make an investment decision. And one of the most important aspects of the project was to determine the investment risk, in order to build a plan for further action to ensure a return on investment in the short and the long term.

Solution:

Due diligence in ICT market – a comprehensive business, financial and technological capabilities analysis

  • Commercial due diligence – business analysis
    • Analysis of customers from the B2C segment (ARPU, dynamics of the number of customers, customer retention rate, the analysis of existing customer base versus market potential based on geolocation, price benchmarking)
    • Analysis of customers from the B2B segment (revenue growth versus growth in the number of customers, the structure and dynamics of revenues per service provided, and per customer group in view of the value of the contract)
  • Technical due diligence – analysis of technological capabilities
    • The quality of infrastructure based on the number of fibres in a cable
    • Historical development of infrastructure broken down into types of cables
    • Analysis of infrastructure topography
    • Market potential of business customers in terms of the size of the client, based on geolocation
    • Analysis of technical and legal documentation of selected sections of infrastructure
    • Infrastructure management
    • Network bandwidth
  • Financial due diligence – financial analysis

Effect:

Recommendations on further action plan

The project resulted in proposals for the profitability of the proposed transaction and recommendations for further possible steps.

The presented conclusions were centred around three main areas:

  • business risks associated with maintaining current cash flow,
  • technical risks, which may prevent or hinder the continuation of business,
  • support in preparing valuations using EBITDA, taking into account the identified risks.

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