Due Diligence for Private Equity
Technology & Software Due Diligence To Ensure Successful M&A
Unlocking Value in M&A
The best businesses aren’t just built on attractive ideas; they’re powered by the strategic application of technology.
At Cuesta, we understand this fundamental truth. We’ve been on both sides of the table, and because of this, you get unbiased analysis about all technology and proprietary software involved in your merger or acquisition. We have a lens of technology expertise as well as a business focus, so we’ll take a look at the positives, the negatives, and all the possibilities.
Because at the end of the day, it’s not about the technology. It’s about what the tech will do for you.
Technology Due Diligence
Due Diligence for Private Equity M&A Requires Nuance
Our approach is bespoke, recognizing each transaction demands a tailored assessment.
We go beyond superficial reviews, digging deep to mitigate investment risk and pinpoint opportunities for maximizing returns. This involves identifying both technological advantages and vulnerabilities, quantifying the resources needed for improvement, and outlining essential steps for post-acquisition integration.
Our team conducts a comprehensive evaluation of the target’s technology. We scrutinize their strategic vision, system architecture and scalability, infrastructure, software development lifecycle, cybersecurity posture, data management practices, and the structure of their technology teams.
Typical Cadence of a Tech Diligence
Weeks 0-1:
Prepare
- Engage in discussions with leadership about the deal timeline
- Determine the materials required for our involvement in the deal
- Determine key questions to be answered throughout the diligence
Deliverable: Data Request List
Week 1:
Initiate
- Kick-off with relevant parties to familiarize the diligence process and address questions
- Outline topics to be covered in the tech diligence session(s)
- Optional onsite coordination, if applicable
Deliverable: Agenda for Tech Diligence Sessions
Week 2:
Interview
- Conduct interviews with key employees (virtually or onsite)
- Draft an initial perspective
- Resolve follow-up questions & data requests
- Generate a full report following the interviews
Deliverable: Initial Perspective
Week 3:
Deliver
- Compile diligence report with detailed findings and analysis, emphasizing key risks
- Readout to discuss key questions and takeaways
- Iterate if needed to ensure high-priority topics are covered
Deliverable: Final Report & Readout Session
Components of a Cuesta Tech Diligence
To determine risk and value opportunities, we ask questions like: “What are the current and future risks of the technology in use?” “What are the hidden ways the underlying tech can create value for your company?” and “How much investment is going to be required to integrate?”
Technology is a tool to help you advance. We see more, so you can make the best moves.
1. Foundational
— Validate the Target’s Technology Foundation
— Assesses How Technology Enables the Target’s Core Value Proposition
2. Downside & Risk
— Surface Hidden Future Costs
— Disposition Areas of Potential Disruption
3. Upside / Value
— Identify Sources of Incremental Value
— Determine Potential Costs for Added-Value Investments
“Our tech diligence process doesn’t just ‘check the box.’ We tailor our approach to identify the risks and value creation opportunities pertinent to the investment theses of our clients.”
Software Due Diligence
Assessing the Real Potential & Risks of Software Investments
A thorough software assessment is crucial for understanding the true value of a technology-driven company.
Cuesta’s approach delves into the target’s software, scrutinizing its functionality, design, and construction. We evaluate aspects like chosen technologies, development methods, and ease of upkeep, pinpointing both advantages and vulnerabilities. Additional open-source code scans, passive cybersecurity scans, and cloud infrastructure mapping can be incorporated for increased perspective and assurance.
This thorough software diligence provides the critical information needed for sound judgment in M&A transactions involving software-driven businesses.
Typical Cadence of a Software Diligence
Weeks 0-1:
Prepare
- Engage in discussions with leadership about the deal timeline
- Determine the materials required for our involvement in the deal
- Determine key questions to be answered throughout the diligence
Deliverable: Custom Software Data Request List
Week 1:
Initiate
- Kick-off with relevant parties to familiarize the diligence process and address questions
- Determine the level of access that will be granted to Cuesta
- Outline topics to be covered in the software diligence session(s)
Deliverable: Agenda for Software Diligence Sessions
Week 2:
Interview
- Conduct interviews with key employees
- Draft an initial perspective on the software
- Resolve follow-up questions & data requests
- Generate a full report following the interviews
Deliverable: Initial Perspective of the Software
Week 3:
Deliver
- Compile diligence report with detailed findings and analysis, emphasizing key risks
- Readout to discuss key questions and takeaways
- Iterate if needed to ensure high-priority topics are covered
Deliverable: Final Report & Readout Session
Components of a Cuesta Software Diligence
Key questions answered in a software diligence often include “Is the application built on a modern stack?” “Does the custom tech offer a proprietary advantage?” and “Will it scale with the business or are refactoring efforts required?”
Giving you the confidence to make informed decisions about your software investments.
1. Build Quality
— Evaluate the Software’s Adherence to Modern Standards
— Confirm the technologies in use are well-supported
2. Risk & Remediations
— Surface Hidden Future Costs
— Highlight Key-Person Risk
3. Suitability for Growth
— Investigate the promise and practicality of the software’s roadmap
— Highlight any refactoring efforts necessary for scale
Additional Services
Open-Source Scan
Automated source code scans efficiently evaluate open-source risks in software. They also enhance visibility into custom applications by pinpointing embedded components in a company’s codebase. Detecting these components is crucial for:
- License Compliance
- Security Posture
- Identifying Outdated Software
Passive Cyber Scan
Cuesta analyzes publicly available data to passively identify vulnerabilities and understand the company’s digital presence without probing its networks or code directly. This includes but is not limited to:
- Dark Web Scans
- IP Address Range Identification
- Passive Port Scanning
Cloud Infrastructure Mapping
Cuesta maps your cloud infrastructure, identifying & assessing security vulnerabilities. We analyze network configurations, resource allocation, and access controls to pinpoint weaknesses and strengthen your cloud security.
- Network Topology Mapping
- Security Group and Firewall Analysis
- Identity and Access Management (IAM) Review
“Protecting your investment is our priority. We’ll flag any potential risks uncovered during the software diligence and if the tech doesn’t add up, we’ll tell you.”
Diligence Is About Asking The Right Questions
So let’s start with a conversation. Connect with us today to talk about your goals.