Technology Due Diligence: The Complete Guide for Investors and Founders

Technology due diligence is the process of assessing a company's technology before an investment, acquisition, or exit. Done well, it protects the buyer from expensive surprises and gives the seller evidence that their technology is a genuine asset. Done badly, or not done at all, it leads to post-deal regret, integration nightmares, and value destruction.

This guide covers what technology due diligence actually examines, the red flags that kill deals, how to prepare if you are the seller, and how the process works in practice. It is written from the perspective of people who conduct this work for private equity firms, venture capital investors, and corporate acquirers.

Why Technology Due Diligence Matters

Every business is now a technology business, whether it knows it or not. A logistics company runs on its routing software and warehouse management systems. A professional services firm depends on its CRM, data security, and client-facing platforms. A SaaS business is its technology.

When an investor or acquirer evaluates a target, the financial due diligence tells them what the business earns. The technology due diligence tells them whether those earnings are sustainable, scalable, and defensible.

The questions it answers are commercial, not technical. Can this technology support the growth plan? What investment is needed to maintain and improve it? Are there hidden risks that could destroy value? Is the team capable of delivering on the roadmap? How dependent is the business on key individuals or specific technologies?

Technology issues that surface after completion are expensive to fix and impossible to negotiate. The right time to identify them is before the deal closes.

What Technology Due Diligence Covers

A thorough assessment examines seven areas. The depth of each depends on the nature of the business and the deal rationale.

Architecture and infrastructure. How the technology is built, where it runs, and whether it can scale. This includes the technology stack, hosting environment (cloud, on-premise, hybrid), database architecture, integration points, and system dependencies. The key question is whether the architecture supports the acquirer's growth plan or whether significant re-engineering is needed.

Code quality and technical debt. The state of the codebase. Automated code analysis tools provide quantitative metrics, but experienced reviewers add context. Some technical debt is normal and manageable. Some is structural and expensive to resolve. The difference matters enormously to the investment thesis.

Cybersecurity and data protection. The business's security posture, including access controls, encryption, vulnerability management, incident response capability, and compliance with UK GDPR. Weak cybersecurity is not just a risk; it is an increasingly common reason for deal price reductions or deal collapse. Cyber insurance underwriters and regulators both expect demonstrable security maturity.

Team and organisation. The skills, structure, and key-person dependencies within the technology team. If the entire architecture lives in one developer's head, that is a risk. If the team is entirely outsourced with no internal capability, that is a different kind of risk. The assessment examines whether the team can deliver the post-acquisition roadmap or whether significant hiring or restructuring is needed.

Intellectual property. Ownership of the technology. This includes confirming that code has been developed by employees or contractors with proper IP assignment, that open-source components are used in compliance with their licences, and that there are no third-party claims over core technology assets.

Operations and resilience. How the technology runs in production. Uptime history, monitoring and alerting, backup and disaster recovery, deployment processes, and incident management. A business that deploys code manually with no rollback capability is a very different investment from one with automated CI/CD pipelines and blue-green deployments.

Roadmap and scalability. Whether the technology can support the post-acquisition business plan. If the plan calls for entering new markets, launching new products, or scaling from 10,000 to 100,000 users, the technology needs to be assessed against those specific requirements.

Red Flags That Kill Deals

Certain findings consistently cause problems in transactions.

Key-person dependency. When one or two individuals hold all the knowledge about critical systems and there is no documentation, no knowledge sharing, and no succession plan. This represents both an immediate risk (what happens if they leave?) and a structural one (the acquirer cannot integrate or improve what they cannot understand).

Undisclosed technical debt. Every codebase has technical debt. The issue arises when it has been hidden from the leadership team and the acquirer discovers a system that needs £500,000 of remediation work that was not reflected in the valuation.

Security vulnerabilities. Unpatched systems, default credentials on production servers, no encryption at rest, inadequate access controls, or a history of unreported breaches. These findings increasingly lead to price chips or deal collapse, particularly when the target handles personal data.

Licensing and IP issues. Code built by contractors without proper IP assignment clauses. Heavy use of GPL-licensed open-source components in proprietary software. Expired or insufficient software licences. These create legal uncertainty that acquirers are rarely willing to accept.

No disaster recovery. If the business cannot demonstrate that it can recover from a major outage within a defined timeframe, the operational risk is too high for most acquirers.

Significant divergence between what was represented and what exists. If the management team described a modern, cloud-native platform and the due diligence reveals a legacy monolith running on ageing hardware, trust is broken and the deal is compromised regardless of whether the technology itself is functional.

How to Prepare for Technology Due Diligence (Seller's Guide)

If you are a founder or CEO preparing your business for investment or exit, you can significantly improve the outcome by preparing before the due diligence begins.

Commission a pre-sale technology audit. Find the problems before the buyer does. An independent technology assessment six to twelve months before going to market gives you time to remediate the most significant issues and present a cleaner picture.

Document everything. Architecture diagrams, system documentation, deployment procedures, incident response plans, data flow maps, and team structure. Due diligence teams spend a disproportionate amount of time on businesses that have no documentation. This creates delays, raises concerns, and signals immaturity.

Get your security house in order. At minimum, achieve Cyber Essentials certification. If your target acquirer is a PE firm or larger corporate, consider ISO 27001. Ensure your UK GDPR compliance is demonstrable, with proper data processing records, privacy notices, and breach response procedures.

Clean up your IP. Confirm that all developer and contractor agreements include proper IP assignment clauses. Audit your open-source usage and ensure licence compliance. Remove any code or components where ownership is uncertain.

Address key-person risk. Cross-train team members, document processes, and ensure that no critical system depends entirely on one individual. This is not just a due diligence issue; it is good business practice.

Prepare a credible technology roadmap. Acquirers want to see that the technology investment story is clear, costed, and aligned with the commercial plan. A roadmap that says "migrate to the cloud" without timelines, costs, or rationale will not survive scrutiny.

What Technology Due Diligence Costs

For the buyer, technology due diligence typically costs £15,000-£50,000 depending on the complexity of the target's technology and the depth of assessment required. A simple SaaS platform with a small team might sit at the lower end. A complex, multi-system technology estate with legacy components and regulatory requirements will be at the higher end.

The engagement usually takes three to six weeks from kick-off to final report, including time for management interviews, data room review, code analysis, and report preparation.

For the seller, the cost of a pre-sale technology audit is typically £8,000-£20,000 and is almost always money well spent. The alternative is discovering problems during buyer due diligence, when the leverage has shifted and the cost of remediation is used to negotiate the price down.

How the Process Works

A typical technology due diligence engagement follows a structured process.

Scoping and planning. Defining what to examine based on the deal rationale, the target's technology footprint, and the key risk areas. If the acquisition is motivated by the target's technology platform, the code quality and architecture assessment will be deep. If the technology is secondary to the commercial acquisition, the focus may be more on risk and operational resilience.

Data room review. Examining the documentation provided by the target. Architecture diagrams, system inventories, team structures, security policies, incident history, and licensing agreements. The quality and completeness of data room materials tells you a lot about the maturity of the technology function.

Management interviews. Speaking with the CTO, engineering leads, and key technical staff. These conversations go beyond what the documents say and reveal how the team thinks, how decisions are made, and where the real risks and opportunities lie.

Technical analysis. Hands-on assessment of the technology itself. Code analysis (static and dynamic), infrastructure review, security assessment, and evaluation of development processes. This is where the theoretical picture meets reality.

Findings and reporting. Producing a report that translates technical findings into commercial language. The best due diligence reports do not just list problems; they quantify the cost and risk of each finding, prioritise remediation, and clearly articulate the implications for the investment thesis.

Boardman's Technology Due Diligence Services

Boardman provides technology due diligence for private equity firms, venture capital investors, and corporate acquirers. Our assessments are led by experienced technology executives who understand both the technical and commercial dimensions of a transaction.

We also work with founders and CEOs preparing for exit, conducting pre-sale technology audits that identify and help remediate issues before they become deal obstacles.

Our approach is practical and commercially focused. We do not produce 200-page reports full of technical jargon. We produce clear, prioritised assessments that help decision-makers understand the technology risks and opportunities in terms they can act on.