Technology issues can significantly hamper a business’s growth potential. During a transaction, the due diligence process is a critical time to identify and assess the technology that could affect capital allocation and growth potential.
On the buy side of a deal, technology risk information can validate the asking price for an acquisition or open avenues for negotiating a better price to leave a buffer for investment. For example, weak cyber defences can require significant investment.
On the sell side, due diligence in this area ensures that technology can be presented as a driver of value. Not only that, but sub-standard technology due diligence can increase an acquirer’s risks, reducing the value of the transaction.
Quality technology due diligence requires an expert’s eye. Our team has the operational and technical skills combined with real-world business experience and tools to identify risks and quantify the steps needed to address them. 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. It should be considered if the following factors relate to your business:
reliance – where technology and data underpin core business operations. For example, for a consumer finance lender;
growth – if business plans require technology to scale (eg product or market diversification, or for technology start-ups;
differentiation – where technology differentiates the business from its competitors. This often applies to industry disrupters;
talent – your technology relies on key staff or third parties to design, build, maintain and support, for example, in platform businesses;
reputation – where loss of commercially sensitive business or personal data could cause significant damage; and
transformation – if digital transformation is planned or ongoing and tied to future revenue and cost projections.
Our buy and sell side approach to technology due diligence accounts for deal timing, deal rationale, and specific focus areas. We manage technology due diligence using a phased approach to reflect findings.
Fast start – we offer 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 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.
If your business uses highly customised applications and platforms, which is often the case for financial services and retail firms, we can examine everything from product management and application architecture, to infrastructure, development processes and operations. We will identify weaknesses or strengths while recommending solutions or commercial software alternatives.
For market-facing technology, we can help you maximise the value of your solution with differentiation analysis to identify the commercial opportunity and relative cost to replicate. This information helps buyers understand the company’s defensibility.
We know how important it is that you get the insights you need quickly, so we act fast and work closely with you. We collaborate with our financial due diligence colleagues to provide an integrated diligence report where this makes the most commercial sense.
For more information about technology due diligence, please contact Paul O’Leary.