Now a days it is quite common for companies to buy direct competitors or companies operating in adjacent industries, such that the target company would fit in nicely with the acquirer’s core business. M&A mergers and acquisitions typically involve a significant amount of due diligence including what obligations it is assuming, the nature and extent of the seller’s contingent liabilities, problematic contracts, litigation risks, intellectual property issues, and much more. This is particularly true in private company acquisitions, in which the seller has not been subject to the scrutiny of the public markets.
Recent M&A activity and litigation have highlighted the need for CEOs to conduct careful due diligence as to potential risks, especially investigating seller’s technology including data breach and cybersecurity issues, and intellectual property issues.
Following are the key areas the CEO should consider for technology due diligence for the target company:
- Has the seller taken appropriate steps to protect its intellectual property?
- What technology in-licenses does the seller have?
- What software is critical to the seller’s operations?
- Does the seller have sufficient IT systems, including computer, information technology, and data-processing systems and facilities, for existing and currently anticipated future needs?
- Does the sellers has all the necessary compliance and security audits on it technology systems to minimize exposure from external threats.
A typical technology due diligence consist of reviewing seller’s technology organization, application and services management, operation and infrastructure management of its technology systems for business continuity and growth.
CEO Tech Tips 