Software product and technology diligence addresses critical issues for private equity funds investing in software and tech-enabled services organizations: whether the target’s products, underlying technologies and organizations will support and enable the investment thesis—based on organic growth, rollup platforms, tuck-ins or operational turnarounds—and whether there are undiscovered product and tech-related risks and opportunities that will affect capital investment, EBITDA streams and, ultimately, valuation.

The key focus areas for this pre-acquisition diligence, whether buy-side or sell-side, include:

• Product portfolios and roadmaps – assessing core product functionality and differentiation, reviewing product roadmaps for new features and innovation, and establishing alignment to the organization’s overall strategy
• Architecture and technology – reviewing the products’ underlying architectures and technologies to determine the potential scalability and flexibility of the platform, as well as assessing technical debt and remediation plans to outline potential incremental investment and EBITDA impairment
• Organization and process – assessing the product development organization’s leadership, talent and processes, for alignment with the product roadmap and to identify potential operational improvements
• Hosting and security – reviewing the hosting infrastructure and related security measures used to deliver SaaS products, as well as identifying potential risks and remediation options