For software and platform companies, technology is not a supporting function, it is the product itself. When the target's value proposition, revenue, and growth trajectory are all built on a software platform, the architecture, codebase, and engineering organization behind that platform become central to the investment case.
Tech Due Diligence, also called Technology Due Diligence or Tech DD, brings this dimension into the transaction process, giving investors a fact-based view of the platform's technical health alongside the financial and commercial analysis that shapes deal decisions.
While IT Due Diligence assesses how a company's internal systems support its business operations, Technology Due Diligence examines the technology product itself, the architecture, source code, and engineering capability that determine, among other things, whether the platform can scale, is sufficiently secure, and can be extended over time
What is Tech Due Diligence?
Tech Due Diligence is the process of assessing a software Target's technology platform including architecture, source code quality, engineering practices, infrastructure and cloud design, scalability, product security, and intellectual property, to determine whether the platform can support current operations and future growth ambitions.
Its objective is to identify technical risks, scalability constraints, technical debt, IP exposure, and value creation opportunities before a transaction is completed. The findings give investors a fact-based understanding of the target's technology and engineering capabilities, supporting informed decision-making throughout the deal process.
Why perform Tech Due Diligence?
Poor architectural decisions, accumulated technical debt, thin or key-person-dependent engineering teams, weak development practices, and unclear IP ownership can all undermine a platform's ability to scale and significantly increase investment requirements after close.
Technology Due Diligence helps investors:
- Understand whether the platform architecture can scale to support the investment thesis
- Assess code quality, technical debt, and engineering practices
- Evaluate the engineering team's capability and dependency on key individuals
- Confirm IP ownership and open-source or third-party licensing compliance
- Assess product security and data protection posture
- Validate the technology roadmap against growth and product plans
- Support purchase price discussions and SPA negotiations
- Establish a roadmap for post-deal product and engineering investment
For both private equity and corporate investors, Tech Due Diligence provides greater transparency into the product itself and reduces technology-related uncertainty ahead of a transaction.
How is Tech Due Diligence performed?
Although every transaction is different, most Tech DD engagements follow a structured framework.
Relevant services and insights
Subscribe to our KPMG insights newsletter
Turn insight into opportunity with perspectives and actionable insights on the issues shaping the future of business - from technology and transformation to transactions and financial services.