This pre-acquisition IT due diligence case study shows how Don Hook, founder of Full On Consulting, assessed a fast-growing healthcare revenue cycle company for a private equity buyer. The review covered systems, infrastructure, the IT team, business processes and market potential, and turned the findings into a priced roadmap.
5
Areas assessed
4
IT staff evaluated
3
Roadmap phases, each priced
Acquired
By the investor
Situation: A Fast-Growing Company at an Infrastructure Crossroads
A private equity firm was considering the acquisition of a healthcare services company. The company helped hospitals collect Medicaid reimbursements and held a 10 to 12% share of its state market. It was growing fast and approaching the point where it needed real infrastructure investment.
Challenge: Startup Systems Carrying a Growing Business
The core systems had worked for a startup but wouldn't carry a mid-sized company:
- A Visual Basic application on Access databases, plus QuickBooks and Excel.
- Database locking problems and remote access issues for staff working at hospital sites.
- A capable but reactive four-person IT team with no IT strategy.
- Business processes that grew headcount in direct line with revenue.
The investor needed to know what it would cost to scale and whether the business could expand into other states.
Action: A Time-Boxed Review and a Priced Roadmap
Don Hook led a short, time-boxed review of five areas:
- IT systems, including the core reimbursement calculator and planned development
- Infrastructure
- The IT organization and its skills
- Key business processes against industry practice
- Market potential, including expansion into other managed-care Medicaid states
The findings became a priced roadmap:
- Now (30 to 60 days): Migrate the core application to a web-based SQL Server and .NET platform, automate manual file processing, replace the phone system, and sort every active project into stop, pause or proceed.
- Next: Build an IT strategy, add staff and service levels, and add document management.
- Later: Future-state IT organization designs for 2x and 5x growth.
Each item carried a cost range so the investor could put it into the deal model.
Result: The Investor Bought the Company
The investor had a clear picture of the investment needed to scale, and a plan to execute it. The firm went on to buy the company.
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