Porsche VW IT due diligence: A hypothetical analysis of the takeover battle and its consequences

n the world of corporate takeovers, thorough due diligence is the key to success. But what would have happened if Porsche had neglected IT due diligence in its hypothetical takeover of Volkswagen and overlooked the current VW data scandal 2.0? Private equity companies need to look at this scenario with particular interest, as it holds important lessons for future takeovers in all industries.

The hypothetical starting situation: Porsche takes over VW

Let’s imagine that Porsche had actually implemented its bold plan and taken over the Volkswagen Group. It would have been one of the most spectacular deals in German economic history – the small sports car manufacturer swallowing the giant. But in our scenario, Porsche made a crucial mistake: The IT due diligence was not carried out with the necessary care.

The overlooked time bomb: the current VW data scandal 2.0

While Porsche focused on the financial and operational aspects of the takeover, a critical problem remained undiscovered: the VW data scandal 2.0. As we know from the latest revelations, the movement data of around 800,000 electric vehicles of the VW, Audi, Seat and Skoda brands were available unprotected on the Internet for a long time [source: 4] [source: 6].

This massive security gap should have been noticed during a thorough Porsche VW IT due diligence. But in our hypothetical scenario, it was overlooked, with far-reaching consequences for the new group.

The immediate consequences for Porsche

1. financial burdens

The financial impact of the overlooked data scandal would have been devastating for Porsche:

Fines: Under the GDPR, infringements can be penalized with up to 4% of global annual turnover. With a combined turnover of Porsche and VW, this could have meant billions of euros.
Claims for damages: 460,000 affected vehicle owners could potentially have asserted claims [source: 4].
Costs for crisis management: PR measures, legal advice and technical improvements would have swallowed up millions more.

2. reputational damage

The damage to the Porsche brand’s image would have been immense. As a luxury brand that stands for exclusivity and quality, Porsche would have suffered particularly from the loss of trust. The association with a massive data protection scandal would have permanently damaged the brand image.

3. operational challenges

The integration of the IT systems of VW and Porsche would have been made considerably more difficult by the scandal. Resources that had been earmarked for merging the companies would have had to be diverted to rectifying the security gaps and revising data protection practices.

Long-term effects

1. delayed synergy effects

The expected synergies from the takeover would have been significantly delayed. Instead of concentrating on integrating production capacities and exploiting economies of scale, Porsche would have been forced to invest considerable resources in cleaning up the current VW data scandal 2.0.

2. regulatory pressure

The supervisory authorities would have placed the new group under closer scrutiny. This would have led to stricter requirements and possibly restrictions on the use of data for future innovations.

3. delay of future projects

Projects in the field of electromobility and autonomous driving would have had to be postponed as confidence in the Group’s data security would have been shaken. This would have set Porsche back in competition with other car manufacturers.

The costs of a missed Porsche VW IT due diligence

Let’s take a closer look at the potential costs for Porsche:

Direct costs:

Fines: 2-4 billion euros (estimated)
Compensation payments: 500 million – 1 billion euros
Technical improvements: 200-300 million euros

Indirect costs:

Loss of sales due to reputational damage: 5-10% of annual sales over 2-3 years
Increased marketing expenditure to improve image: 500 million euros per year for 3 years
Delay of synergy effects: 1-2 billion euros per year for 2-3 years

Long-term costs:

Increased compliance costs: 100-200 million euros per year
Delay in innovation projects: difficult to quantify, potentially billions in lost sales

In Toto:

In total, a missed Porsche VW IT due diligence could have potentially cost the Group 15-20 billion euros over a period of 5 years.

Lessons for future takeovers

Private equity companies must learn important lessons from this hypothetical scenario:

IT due diligence is critical: In an increasingly digitalized industry, a thorough review of IT infrastructure and data protection practices is essential.
Cybersecurity as a core competence: Companies must treat cybersecurity as a strategic priority, not as a side issue.
Data protection as a value-adding factor: Robust data protection can be a competitive advantage and should be considered positively when evaluating a takeover target.
Integration of IT and OT: The merging of information technology (IT) and operational technology (OT) in the automotive industry requires a holistic due diligence strategy.
Consider cultural aspects: The corporate culture with regard to data protection and IT security must be taken into account during acquisitions.

The role of Porsche VW IT due diligence in Industry 4.0

In the era of Industry 4.0, IT due diligence is becoming increasingly important in company takeovers. The hypothetical case of Porsche and VW shows that traditional due diligence processes are not sufficient to fully capture the risks in a networked automotive industry.

A comprehensive Porsche VW IT due diligence should have taken the following aspects into account:

Data management and security
IT infrastructure and network security
Compliance with data protection laws (GDPR, BDSG)
Integration of IT and OT systems
Cybersecurity strategies and practices
Innovation pipeline and technological competitiveness

By neglecting these aspects, Porsche would not only have overlooked financial risks, but also missed the opportunity to identify and exploit synergies in areas such as big data, artificial intelligence and connected mobility.

Strategic implications for private equity

This scenario gives rise to important strategic considerations for a private equity company:

Expansion of the due diligence team: In addition to financial experts and industry experts, IT specialists and data protection experts, such as Dr. Claus Michael Sattler, must be involved in the takeover process from the outset.
Valuation of data protection assets: The quality of a company’s data protection practices and IT security measures should be included as a value-increasing (or decreasing) factor in the company valuation.
Post-merger integration: The integration of IT systems and data protection practices must be considered a critical success factor for the realization of synergies.
Investment in cybersecurity: We must be prepared to make significant investments in improving the cybersecurity infrastructure of our portfolio companies.
Long-term value creation: The creation of robust data protection and IT security structures should be seen as a long-term value creation strategy, not as a short-term cost burden.

Conclusion: The importance of Porsche VW IT due diligence for the future of the automotive industry

The hypothetical scenario of a failed Porsche VW IT due diligence is an impressive illustration of how crucial a thorough review of IT infrastructure and data protection practices is when acquiring companies in various industries. At a time when machines are becoming computers and data is becoming the new oil of the economy, no company can afford to neglect these aspects.

For private equity companies, this means that they must rethink and expand their due diligence processes. Porsche VW’s IT due diligence must serve as a blueprint for future takeovers. This is the only way to ensure that not only financial risks are minimized, but also that the enormous opportunities arising from a robust IT infrastructure and responsible handling of data are recognized and exploited.

All industries are facing profound change: the automotive industry as an example driven by electrification, autonomous driving and connected mobility. In this context, IT due diligence is becoming a decisive factor for the success of takeovers and mergers. Companies and investors that recognize this and act accordingly will be the winners of the transformation.

Ultimately, the example of Porsche and VW shows that in the era of Industry 4.0, technological know-how and data expertise are just as important as financial strength and market position. A thorough Porsche VW IT due diligence would not only have uncovered risks, but also revealed opportunities for innovation and value creation. This insight will have a lasting impact on future investment strategies in all industries and help due diligence companies to navigate successfully in an increasingly digitalized world.

Sources

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