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Technology Due Diligence

Impact of A Technology Due Diligence On the Investment Thesis

Technology Due Diligence Thesis|

The Importance Of The Investment Thesis

Running a technology due diligence in absolute format is possible, but thesis-driven diligence would provide better value. As the goal of the technology due diligence is to assess risks that can get in the way of the investment goals, it serves the acquirer much better if the diligence can zero in on a clear thesis to best inform value creation efforts and identify the top risks where mitigation is needed.

A thesis-focused technology due diligence can help an investor or acquiring company to better:

  1. Understand the strengths, weaknesses, and gaps in the product or service compared to the competition and the ability to capture revenue quicker

  2. Understand the architecture and infrastructure suitability and ability to evolve to:

    • Accommodate expansion in existing markets or new markets

    • Improve product/service features and quality to add customer value

    • Evaluate the ability to pivot under competitive threats or market shifts

  3. Eliminate hidden surprises that could interfere with revenue generation or require significant additional and distracting investments, such as security gaps, unmanaged technical debt, vulnerabilities, or business continuity issues.

  4. Gain trust in the leadership and team to execute and deliver, including attracting and retaining talent to execute on the roadmap with a reasonable and optimized cost.

  5. Test the investment thesis to make sure that the investment is solid but also evaluate other strengths to improve or extend the thesis, ultimately evaluating a fair price.

The best tech due diligence aligns with the investment thesis and quantifies against value creation levers taking into consideration the effects on revenue, EBITDA margins, and exit multiples expansion.

About Tech Due Diligence

Software Technology Due Diligence is sometimes called tech due diligence or technical due diligence. However, it is different from IT due diligence, which is reserved for companies that are not software companies but are instead more tech-enabled.

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  • Free Soundboard Sessions: Chemistry has to work, and you and your team must have confidence in our execution. We offer a no-strings-attached session to discuss potential acquisitions and deals at no cost to you. Contact us to book a session.

  • Attend RingStone Academy: Our team shares insights and experience about technology best practices, technical due diligence practices, software architecture, AI, cloud, and security topics.

  • Custom Education Sessions: We offer sessions to help deal with teams and operating partners in Private Equity with technology best practices for technical due diligence execution and what to look for in the early exploration stages. Contact us to discuss availability.

  • Other Resources

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