Insights & White Papers

Why Technical Due Diligence is Crucial in Mergers and Acquisitions

By Liberty Advisor Group

Mergers & Acquisitions

Technical Due Diligence is not just a “Check the Box” exercise. Doing technological due diligence is now more critical than ever when managing mergers and acquisitions.

Technology: it’s more than just a buzzword, especially as an increasing number of businesses rely on it to take care of their daily operations.

Technology is critical for data control and collection, security, and a host of functions across many organizations. As an organization prepares for a merger or acquisition, technical due diligence has become increasingly critical.

Improving a Company’s Operations: The First Move

Private equity has many options available to improve a company’s operations. The first play, however, should almost always be on the technology side. This is where most companies can expand enterprise value 10% to 15% with quick wins. In fact, as many as 95% of companies can quickly improve their overall functionality and profits–not to mention their value–just by using the right platforms and integrations across the company.

During mergers and acquisitions, this awareness is critical for two reasons. First, it’s important to know what platforms, integrations, and technology solutions the business is already using. Since they can have a huge impact on the business’s overall value and functionality. Second, if the business isn’t functioning at peak efficiency, updating that technology could be a critical first move after the deal.

Technical Due Diligence: It’s Not Just a “Check the Box” Exercise

Over the past several years, technology has become more central than ever to performance and competitive advantage, not just in tech companies, but in almost every company. Most companies are highly reliant on technology to perform at the highest possible level within their industries. Doing technological due diligence is now more critical than ever when managing mergers and acquisitions. Both within the technical space and outside it.

Technical due diligence highlights technology gaps.

Often, organizations have technology gaps that they may not have identified. And during the merger or acquisition process, it’s critical to identify those gaps and help bring the technology up to level. For example, many companies have outdated applications that are no longer supported. This could make it difficult for the organization to weather a glitch or problem with that application. Others may have an outdated infrastructure that cannot continue to support the high level of data that moves through that system on a daily basis.

Technical due diligence can help identify and call out potential risks.

A lack of security is an immense problem for many organizations. Cybersecurity has become an increasingly important investment. With platforms like Corelight landing as much as $75 million to aid in cybersecurity platforms and infrastructure, many organizations have seen cyber threats emerge as never before. Compliance gaps can cost companies a great deal, especially if they suffer a breach. Furthermore, disaster recovery has become more critical than ever for many companies.

With cyber threats on the rise–and the potential for a natural disaster to quickly take down a company’s physical infrastructure–it’s critical for organizations to have a solid cybersecurity system in place. Technical due diligence can help identify those gaps and ensure that the company isn’t getting into more trouble than it anticipated with the new merger or acquisition when those networks will combine. A security threat poses a substantial problem for the newly acquired company. It may also pose a problem for the parent company, too, as a hacker uses that access to get inside the parent company’s system.

Better Technology Sells

Companies with better technology are commanding higher prices across multiple industries. Companies that boast best-in-space technology are fetching multiples more commonly associated with pure software plays. Capital naturally goes to the places that offer the highest potential returns–and technology has helped improve returns for many businesses.

The Benefits for Buyers

From the buyer’s side, better technology has a number of crucial advantages. First and foremost, if a company leverages technology well, it likely has already done away with tedious labor. This can mean both lower costs when it comes to hiring employees and more satisfied employees in general. Since they won’t have to worry about many of those repetitive activities as a part of their usual workflow. As a result, employees are more likely to be engaged, creative, and productive. That means innovations that could potentially rock the industry and provide additional cash flow for the business.

High-level technology often also includes proprietary platforms that become the property of the purchasing company after a merger or acquisition. Those proprietary platforms can provide clients and users with options that simply aren’t available elsewhere in the marketplace. This can lead to increased profits and awareness of the business as a whole.

The Benefits for Sellers

Since buyers are aware of the benefits of technology, sellers benefit, too. Sellers can often command higher prices when they have technological advantages to offer the buying company. Furthermore, they may be able to ask for other advantages during the selling process, including retaining current employees for a period of time, continuing to generate profits from a piece of proprietary technology for a period of time, or other key perks that will benefit the sellers immensely.

Technical Due Diligence: It’s Not Just for Tech Mergers and Acquisitions

Technical due diligence, while it’s crucial for businesses in the tech industry, is vitally necessary for any business. Many people, including savvy business owners, frequently assume that technical due diligence is only for companies in the tech industry. In reality, however, it’s critical for all businesses.

A thorough technical due diligence can set you up for future growth and benefits, ensure that you are safe from cybersecurity threats, and help put you in a position to succeed for years in the future. Technology is the lifeblood of many organizations. If the technology is falling behind, chances are, the organization will not deliver up to expectations. On the other hand, if the technology is in place, the organization is ideally positioned to achieve its goals.

If you’re looking for superior returns on your next M&A process, make sure you’re looking to technology. While those companies may have greater overall costs upfront, they are also likely to continue to show returns for years in the future. By conducting your technical due diligence, you can make much better overall investment decisions.

At Liberty Advisor Group, we understand the fast-paced nature of M&A deals.  We accelerate timelines for quicker value realization. Using the power of technology, we grow investments and improve valuation. Our team of senior technologists and business operators understand the importance of top line growth and bottom-line efficiency. Contact Us and realize the intended value of your transactions.


Liberty Advisor Group is a goal-oriented, client-focused, and results-driven consulting firm. We are a lean, handpicked team of strategists, technologists, and entrepreneurs – battle-tested experts with a steadfast, start-up attitude. We collaborate, integrate, and ideate in real-time with our clients to deliver situation-specific solutions that work. Liberty Advisor Group has the experience to realize our clients’ highest ambitions. Liberty has been named as Great Place to Work, to the Best Places to Work in Chicago, and to FORTUNE’s list of Best Workplaces in Consulting and Professional Services.

By Liberty Advisor Group