Case Study: Private Equity

PARAVERIFY IT REDUCES ACQUISITION RISK AND PURCHASE

PRICE FOR PRIVATE EQUITY CLIENT In today’s highly regulated business environment, accurately assessing Total Cost of Ownership (TCO) and potential risks have become almost impossible for private equity firms. When a company sets out to acquire, it will scrutinize every detail of that organization’s financials, operations and legal issues. But what is often left out of the due diligence process is a review of the IT infrastructure and security threats. This oversight can result in unanticipated IT spend and possible regulatory compliance issues down the road. Paranet Solutions recently completed just this type of due diligence for a private equity firm. The results of this evaluation and analysis made a significant impact on the acquisition process.

THE CHALLENGE. Prior to acquiring a national medical services company, one private equity firm decided it wanted a clear picture of the entire organization prior to purchase. It looked to Paranet Solutions for some answers. The project objectives were as follows:

• Determine the company’s’ current technology status, including hardware, systems software and applications software; as well as the level of automation the business had in place.

• Identify issues related to the company’s ability to maintain its current technology and meet its business plan.

• Assess financial implications of the company’s technology environment. • Provide the private equity firm with a clear understanding of the TCO and

identify any business risks associated with the acquisition. • Provide a remediation roadmap once the acquisition was complete.

THE SOLUTION. “This private equity firm selected us to complement the work already being performed by their financial, legal and operational analysts because we offered a proven and proprietary approach to the IT portion of the due diligence process,” says Alan Bratton, Chief Executive Officer of Paranet Solutions. “By utilizing our comprehensive solution for calculating TCO and risk – ParaVerify IT™ – we were able to bring tremendous value to this acquisition process.”

Paranet reviewed and

cataloged:

• All server-based

applications

• Hardware and software

infrastructure architectures

• Voice and data network

infrastructures

• Policies and procedures

• All automation processes

• Identified major ongoing

technology expenses

“By utilizing our comprehensive solution for calculating TCO and risk – ParaVerify IT – we were able to bring tremendous value to this acquisition process.”

-Alan Bratton Paranet Solutions, CEO

Paranet Solutions Contact: 214.623.5150 (phone) 214.623.5301 (fax) 214.623.5200 (support)

Paranet Solutions | www.paranet.com

Paranet Solutions | www.paranet.com

ParaVerify IT is the result of Paranet’s 20+ years of experience delivering IT assessment services for companies going through a merger or acquisition. It is a methodology that specifically targets the areas often overlooked during the valuation process. By examining infrastructure and applications, IT security, service delivery and support, Paranet can assign value to data and quantify risk that can impact acquisition priorities. For this particular private equity client, Paranet reviewed and cataloged all sever-based applications; scrutinized hardware and software infrastructure architectures, as well as voice and data network infrastructures; reviewed policies and procedures; identified major ongoing technology expenses; and reviewed all automation processes to determine if they were effective and enhancing productivity.

THE RESULTS. As a result of Paranet’s research, report and recommendations, the client was able to lower the purchase price of the medical services company by more than $1,000,000. Some of the more significant efficiencies and deficiencies identified by Paranet included:

• A moderate to high risk to the company’s infrastructure environment due explosive growth coupled with a poorly defined backup and recovery process.

• Spam filtering was adequate and viruses were rare and well contained. • Data centers were not operating according to industry best practices. • Hardware and software infrastructure architectures were modern and current, but interfaces between

applications were inconsistent and required constant attention. Paranet identified the following business risks:

• A disaster recovery plan that was incomplete, unclear and untested. Likewise, the company had no physical security plan. Mission- and business-critical systems were operating on a single, non-redundant platform.

• A vulnerable and limited backup power supply. • A lack of succession planning. • Poor integration of system interfaces that fed into financial software. • No asset management or configuration management plan. • A lack of formal budgeting and planning processes. • No external security audits were being performed.

“The assessment summary we provided the client played a critical role in the negotiation process,” says Bratton. “We identified several areas of concern that left unaddressed, would have resulted in a significant post-acquisition investment.”

As a result of Paranet’s research, report and recommendations, the

client was able to lower the purchase price of the medical services

company by more than $1,000,000