Whether purchasing a company, or assisting in selling your own, due diligence will inevitably be part of the process. This article is most concerned with the technical or scientific due diligence that should be done after you have been given (or provided with) a term sheet. This is not an all-inclusive list, and of course requires context to be considered during the process.

Intellectual Property (IP)

During the due diligence process, it’s crucial to assess the target company’s IP portfolio to determine if it aligns with our business goals. Understanding the strength of the IP and its value will help us determine if it’s a good fit for our company.

Technology Stack

The technology stack is the set of technologies used to create an application or platform. During due diligence, it’s important to understand the target company’s technology stack, including programming languages, development tools, and infrastructure. This information can help us understand how the technology fits with our existing systems and whether it will be easy to integrate.

Security

Security is a crucial aspect of any technology company. During due diligence, it’s important to evaluate the target company’s security posture, including their security policies, procedures, and infrastructure. We must assess the risk and potential impact of any security issues to determine if it is worth the acquisition.

Product Roadmap

Understanding the target company’s product roadmap is critical in determining how the acquisition will impact our long-term strategy. It’s important to understand where the company is going, what their priorities are, and how their product roadmap aligns with our long-term goals.

Financials

A thorough understanding of the target company’s financials is critical during due diligence. We must examine their revenue, cash flow, expenses, and profitability. This information can help us determine the value of the acquisition and the potential return on investment.

Compliance

Compliance with laws and regulations is essential in any business. During due diligence, we must assess the target company’s compliance with laws and regulations, including data protection, privacy, and security regulations. Any compliance issues can have significant legal and financial ramifications.

Technical Debt

Technical debt is a term used to describe the cost of maintaining and upgrading outdated or inefficient technology. During due diligence, we must assess the target company’s technical debt to determine the cost and time required to upgrade or maintain their technology. We must evaluate the potential impact of technical debt on the acquisition and our long-term strategy.

Talent

The talent of the target company is a critical factor in determining the value of the acquisition. We must evaluate the skills, expertise, and experience of their technical staff to determine if they are a good fit for our company. We must also assess any potential impact on our existing team.

Scalability

The ability to scale technology is critical for any growing business. During due diligence, we must evaluate the target company’s technology scalability, including their infrastructure, software, and hardware. We must determine if the technology can handle the demands of our business and support future growth.

Integration

Integration is a crucial aspect of any acquisition. During due diligence, we must evaluate the potential impact of integrating the target company’s technology with our existing systems. We must assess any potential risks and the cost and time required for integration.

The due diligence process is a critical component of any acquisition or merger. It is essential for senior management to approach the process with a clear understanding of what needs to be evaluated, and to do so thoroughly. The factors that we’ve outlined in this article are a good starting point for technical and scientific due diligence. However, the list is not exhaustive, and each company will have its unique considerations that need to be taken into account. Additionally, it’s vital to understand the broader strategic context of the acquisition, and how the target company’s technology and science fit into the picture. By taking a comprehensive approach to due diligence, we can minimize risk, ensure that the acquisition aligns with our long-term strategy, and ultimately set ourselves up for success.