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What is Technology Due Diligence?

Technology due diligence is the process of assessing and evaluating the technology ecosystem of a company, including the strategy, processes, product, architecture and people. It is the same as technical due diligence. This is usually undertaking as part of the acquisition of a company by an investor (such as Private Equity) or another company as part of a Merger and Acquisition (M&A). It can also be referred to as technical DD or technical diligence.

What is the Technology Due Diligence process?

The process for technology due diligence typically starts with an initial call between the advisor and the company that is to be assessed, typically referred to as the target company. The terms of reference for the exercise are agreed including the high-level approach, the key contacts and timings. The advisor will then request documentation from the target alongside preparing an initial set of questions that will be finialised and sent to the target once the documentation has been received and reviewed. An onsite meeting or remote call follows, allows the different parts of the technology to be reviewed in detail, the scope of which will have been agreed in advance. This can typically take 1-2 days onsite or between 2-6 remote calls of 2-3 hours in duration. The advisor will follow-up following each meeting for clarifications or additional information requests and start to produce their report alongside. This will be a detailed evidence-based report that offers the advisor’s opinion on the merits or otherwise of what they have seen.

What are the typical Technology Due Diligence questions?

The questions asked by the advisor during technical due diligence will be tailored to the specific scope of the engagement, which in turn is tailored to the nature of the investment, the target company and the time available. For example, in a highly competitive situation where a minority investment is to be made and little time available, the scope will be limited to the specific areas that could cause an immediate impact to the enterprise value of the company. If a majority investment is being made with the luxury of time, the scope will expand into wider areas including strategy, product, process and people.

Can a Technology Due Diligence checklist be used?

Advisors will customise their technology due diligence questions to the specific company that they are assessing. A tech due diligence checklist therefore can only cover the common areas and be used as an initial starting point. Typical areas will include strategy, product management, software development process, infrastructure and architecture (including scalability, resiliency and robustness), technology debt, security, data and analysis, technology people and expenditure

What does a Technology Due Diligence report look like?

The output from technology due diligence is a detailed report that outlines the key risks, weaknesses and opportunities aligned to the scope of the advisor’s assessment. As such, the report template will vary from advisor to advisor, and it’s not uncommon for their clients to request bespoke versions that are tailored to their report formats. This enables the reports from all due diligence providers to be brought together in a common format to enable a shared understanding of all areas of the business to be obtained.

What are Technology Due Diligence services?

Advisory firms will offer services beyond technology due diligence, such as those that would typically be needed by the investor post-transaction. These can range from services that can be boxed into product offers, such as assistance in defining and delivering the technology strategy, to more bespoke services such as offering specific skills and expertise that can be matched against a very specific need, for example the migration from one system to another.

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