Conclusions of a Technology Due Diligence Study
Last week’s post looked at what a typical technology due diligence assessment involves. This week’s post describes what happens once the process is complete:
At the end of the technology due diligence (TDD) assessment, results are collated into a final report.
“Conclusions and recommendations must be formulated, and full details of methodology, sources, and references documented”
“Technology due diligence: the need for and benefits of technology assessment in connection with investment in high-tech companies”
Carol R. Goforth, Ronald R. Goforth
Rutgers Computer & Technology Law Journal, Summer 2001
Far beyond simply providing an overall recommendation on whether or not to go ahead with the investment, merger or acquisition, the report will contain a detailed breakdown of technical findings and, most importantly, their implications for the future performance of the proposition. This is one of the key skills of any TDD assessor: an ability to translate technical findings into “dollars and cents” implications for the value of the deal.
The TDD assessment will highlight technical, graded according to severity and likelihood. A good TDD report will also highlight mitigation strategies for each risk.
“TDD should go one step beyond just finding potential for breakdowns, business interruption and financial losses. It should add value by coming up with concrete solutions for mitigating loss potential.”
“Eye On Technology”, Michael Bruch, Allianz Global Risks Report 2/2005
Often a TDD study report will not recommend avoiding a deal outright, but will instead suggest a path for the company that will minimise risk and hence make the deal an attractive one.
The broad approach and detailed analysis of a TDD study can also uncover areas of opportunity for additional revenue or cost saving that have previously been left unexplored.
In summary, the TDD assessment is a thorough examination of every technology-related facet of the proposition company that results in a recommendation, an evaluation, and an ongoing strategy in relation to the proposed deal.
Next week: The Technology Due Diligence Team