Technical Due Diligence
Similar to traditional due diligence, technical due diligence is a detailed look and evaluation of the technical components of a corporation. This is typically completed prior to an investment or sale of a company. By focusing on the technical aspects of a company, the due diligence can give a clear indication of the overall technical health of a business. The features that are evaluated include software systems, hardware and systems, as well as establish what technologies are unique and new to the company in question. It may require the financial person to travel extensively to properly evaluate the technology and related services that the company utilizes.
There are four main components to a technical due diligence report that are considered.
Vitality. Vitality is the energy – the life of the company. From a technical angle, the vitality of a company can be seen in the skill levels of the programmers, the longevity of employment, what new coding or programming functions are being worked on.
Scalability. Scalability measures the ability of the technical side of a company to adapt as needed. This may include discussions about how to handle a sudden surge in web hits, hosting protocols and other metrics that run the technology aspects of the company.
Maintainability. This indicator is a means to measure if the coding done is maintainable. How the company handles code reviews, bug tracking systems and other software related issues are all part of the maintainability of a company.
Continuity. Finally, a technical due diligence report will consider the long term continuity of a company. Contingency plans, disaster recovery, back-up plans and information sharing are all important features that prospective buyers need to be aware of.
The technical due diligence report is another piece of information that can give insight into the health of a company. An investigator is looking for both strengths and weaknesses in a company in order to make an informed decision about a potential purchase.