Tips for CEOs on technology due diligence for acquisition.
Updated: Nov 24, 2022
Nowadays, it is common for companies to buy direct competitors or companies operating in adjacent industries so that the target company would fit in nicely with the acquirer’s core business. M&A mergers and acquisitions typically involve a significant amount of due diligence, including what obligations it is assuming, the nature and extent of the seller’s contingent liabilities, problematic contracts, litigation risks, intellectual property issues, and much more. This is particularly true in private company acquisitions, in which the seller has not been subject to the scrutiny of the public markets.
Recent M&A activity and litigation have highlighted the need for CEOs to conduct careful due diligence on potential risks, especially investigating sellers’ technology, including data breaches, cybersecurity issues, and intellectual property issues.
Following are the key areas the CEO should consider for technology due diligence for the target company:
Has the seller taken appropriate steps to protect its intellectual property?
What technology in-licenses does the seller have?
What software is critical to the seller’s operations?
Does the seller have sound IT systems, including computer, information technology, and data-processing systems and facilities, for existing and currently anticipated future needs?
Does the seller have all the necessary compliance and security audits on its technology systems to minimize exposure to external threats?
A typical technology due diligence consists of reviewing the seller’s technology organization, application and services management, and operation and infrastructure management of its technology systems for business continuity and growth.
The ideas mentioned above are meant as information to ease your organizational processes. However, if you would like a more detailed overview, do not hesitate to reach out to me at rizwan.khan@mac.com.
I have years of experience building Technology and providing Technology Due Diligence as a CTO, and I am available for fruitful discussions.
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