Technology due diligence

For private equity and corporate acquirers, identifying and assessing technology that can affect capital allocation and growth potential is critical during the diligence process. Technology risks can consume significant post deal investment or impair long term revenue gains. 

On the buy side of a deal, this information can validate the asking price for an acquisition, or open one or more avenues for negotiating a better price (eg weak cyber defences that need investment). On the sell side, this process ensures that tech can be presented in the strongest possible light (eg a scalable and secure core platform). In fact, a sub-standard technology due diligence effort can increase the risks, reducing the value of any transaction.

Quality technology due diligence doesn’t happen by accident. Our team has both the operational and technical skills, combined with real-world business experience and tools to identify risks and quantify remediation needs. We can also highlight investment opportunities and target revenue or margin growth areas.

Could you benefit from technology due diligence?

Technology due diligence is valuable when technology and data are a source of value creation and it should be considered alongside the following factors:

Reliance

Technology and data underpin core business operations.

For example: Consumer finance lender.

Growth

Business plans require technology to scale (eg product or market diversification).

For example: Technology start-up.

Differentiation

Technology differentiates the business from its competitors.

For example: Industry disruptor.

Talent

Technology relies on key staff or third parties to design, build, maintain and support.

For example: Platform business.

Reputation

Loss of commercially sensitive business or personal data could cause significant damage.

For example: Insurance broker.

Transformation

Digital transformation is planned or ongoing, and tied to future revenue and cost projections.

For example: Online retail.

Our approach

Our buy and sell side approach to technology due diligence accounts for deal timing, deal rationale, and specific focus areas. Technology due diligence is progressed using a phased approach to reflect findings:

Fast start – We provide a high-level overview of the technology environment (core systems through to strategy, organisation and governance), and identify potential areas of risk and investment opportunities.

Deep dive – We provide a detailed assessment and deep dive into specific areas of focus, such as identifying the commercial opportunity of a platform, business capabilities, and alternatives available.

Cyber and privacy – We deliver a detailed assessment to reveal the risks and potential costs that insecure systems, immature security processes, or inadequate data handling may have.

For technology businesses or businesses that make use of highly-customised applications and platforms (eg financial services and retail), we can examine the product management, application architecture, infrastructure, development processes and operations, and technology team to identify deficiencies or strengths, while recommending remediation options or commercial software alternatives. 

For market-facing technology, we assist with differentiation analysis to identify the commercial opportunity and relative cost to replicate, helping buyers understand the company’s defensibility.

We can mobilise quickly and work closely with our financial due diligence colleagues to provide an integrated diligence report.

For more information about technology due diligence please contact Paul O’Leary

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