Tech Due Diligence

Tech due diligence is a comprehensive assessment of a company’s technological systems, processes and risks. It helps investors and companies to understand the technical performance, security standards, development practices and scalability of a target company’s technology. The aim is to identify hidden risks, assess the value of the technology and determine whether the technology meets future business objectives.

Tech due diligence is important for several reasons:

• Risk Minimization: Identifies potential technological and operational risks that could cause financial losses.
• Value Assessment: Helps in assessing the true value of a company’s technology and its potential to boost business success.
• Future-proofing: Evaluates whether the target company’s technology is future-proof and can easily adapt to new market requirements.
• Integration and Synergies: Enables the acquiring company to understand the technical compatibility and potential synergies that could arise from integrating the two companies.

• Technology Stack: The technologies, frameworks, and tools used.
• Architecture and Infrastructure: The structure and scalability of systems and networks.
• Development Processes: Software development methods and practices, including Agile, DevOps, etc.
• Data Security and Privacy: Security protocols, compliance with data protection laws, and the presence of security vulnerabilities.
• IP and Licensing Management: Assessment of intellectual property and software licenses to ensure legal claims and compliance.
• Team and Competencies: The skills, experiences, and structures of the technology team.

Technische Due Diligence can be carried out internally by the buyer’s investment or acquisition team or externally by specialized consulting firms. The choice depends on the complexity of the technology, the resources and the expertise of the buyer company. External consultants often bring specialized knowledge and an objective perspective that internal teams may not have.

The duration of a Technische Due Diligence varies depending on the size and complexity of the target company and the scope of the areas to be evaluated. Typically, it can take from a few weeks to several months. It is important to allow sufficient time to conduct a thorough assessment, gathering and analyzing all relevant information.

Companies expecting a due diligence can prepare by:

• Updating Documentation : Ensure all technical documentation, architecture diagrams, and process descriptions are up to date.
• Conducting Security Audits : Perform internal or external security audits to identify and address security vulnerabilities.
• Checking Legal Compliance : Review compliance with relevant data protection and security laws.
• Organizing IP and Licenses : Ensure all intellectual property rights are clearly defined and documented and that all software licenses meet requirements.