Look Before You Leap: Technical Due Diligence for Private Equity Firms

In technical due diligence, each finding references technology. You’re looking to understand technological trends, risks, and benefits that affect competition and sustainability of the product and the market. When a target is a technology company, everything from data security and privacy, engineering capabilities, scalability, technical debt, and maintenance strategy is critical.

Technical due diligence is the most efficient way to validate the value of a target company and gain insight into its ability to embrace digital transformation scenarios. This type of investigation is essential for mergers and acquisitions.

As business complexity and the multitude of cloud services increases, technical due diligence will only become more complicated. Here’s a scenario.

Imagine a takeover that depends on a business continuity plan. It fails because integration takes two years—not five months as was expected.

How did this happen? Cloud-transition practices applied to the acquired product were insufficient. It impacts the planning and activities that align the product with a planned artificial intelligence system. The company suffers from delays in implementing AI functionality that could propel it to become a market leader.

An expert investigation of the target company could have revealed adequate information on integration time. Technical due diligence would help predict cloud services issues and better plan AI opportunities that accelerate market growth.

What is technical due diligence all about?

This specific type of due diligence investigates technology developed by a target. Technology can be a source of potentially significant income.

Technical due diligence captures perspectives necessary to evaluate the technology potential of a target. It looks at:

• Architecture and algorithms
• Data and analytics
• Cloud and operations
• Privacy and security
• People and processes
• Strategy and innovation

How does SoftServe approach technical due diligence?

At SoftServe, we ensure that a private equity investor receives the necessary technology-focused information to gain perspective and actionable insights. This requires all parties of the process to be aligned and investors to control the agenda.

Our methodology is a core factor in providing a complete picture of both current and future aspects of technology, operations, and people at a target company. Here is a brief list of the technology-related elements that often are a top priority for assessment. The elements vary depending on the business domain, technological maturity, or other factors.

We discuss, select, and prioritize these aspects with our client. Findings are outlined in a final report that complements commercial and product-related elements of the assessment. It rewards investors with a 360-degree view of what currently exists, complemented by post-acquisition scenarios.

Let’s talk about how SoftServe can deepen your confidence in target acquisitions with our technical due diligence process.