With a decline of at least 22% in M&A deals and fundraising between 2022 and 2023, the transaction market is uncertain and fragile, encouraging investors to be very careful.

  • The technology sector, although also affected, is regaining its attractiveness to investors with new technologies (generative AI, quantum technologies, next-generation software development…) disrupting the market and leading to a dynamic situation both in terms of M&A and fundraising activities. Identifying and mitigating the main risks related to the targets prior to the M&A deals has become a crucial element throughout the transaction process.
  • Investors often focus on the business model and finances but underestimate the importance of the technology organization, platform architecture, infrastructure, and processes, even though they are either the keys to success or the sources of critical risks. Conducting a Technology Due Diligence (Tech DD) with the help of experienced external professionals is a best practice to unveil uncertainties before investing in a tech company and ensure that the technological assets of the target are those of a future unicorn rather than a future pony.

In 2023, the American social media unicorn “IRL” went bankrupt after admitting that 95% of user accounts were fake or robots with only 1 million real users instead of 20 million. An in-depth assessment of the technological assets with Tech Due Diligence could have helped alert investors to this massive fraud.

In 30 seconds - At BearingPoint Capital, we have conducted hundreds of Tech DD and have sometimes identified major risks. To illustrate, on two recent Tech DDs:

  • The first example was on a manufacturing marketplace start-up, we have identified that recruitment of 19 new technology employees in a competitive market of a country with a shortage of resources will not be easily reached, so we highlighted the risk and proposed to enlarge recruitment to other countries where they were planning to have some presence and offices.

  • The second example was on a software company for healthcare, we have been assessing with the management team their technical debts in depth and determined a plan to mitigate the risk by migrating applications to modern technical stacks. An estimate of effort and costs associated with this plan has been discussed between the buyer and the seller. 

According to our experience, there are some key enablers for a start-up to have in mind:

  • On the tech organization: they should anticipate all skills to grow at next level.

  • On the technical platform architecture: they should ensure that the scalability, technical debts, and integration capabilities will not limit future go-to-market and client growth.

  • On IT Security and Process: they should guarantee quality of services without any disaster or data leakage and anticipate people, processes automation and tools to manage it.

BearingPoint Capital, as the dedicated Business Unit of BearingPoint in M&A advisory, provides Tech DD on both buy-side and sell-side for Private Equity, Venture Capital, and Corporates in all industries.

Our offer results from in-depth study of the target technology strategy, organization, and assets, based on exchanges with target’s executives and documents, and our unique expertise. We assess the capability of the target’s technological strategy to support the business model and we provide concrete recommendations to mitigate the risks.

The objectives of the Tech Due Diligence are multiple:

  • Identify technological factors that could limit growth or even raise a risk to the future activities of the target.

  • Propose action plans to mitigate these risks based on our expert opinions and insights from dozens of Tech Due Diligences conducted with companies of all sizes, from start-ups to major corporations’ branches.

  • Suggest best practices to follow market technological trends in terms of development methodology, security standards, cloud hosting etc.

  • Anticipate the technological challenges of the target as potential future unicorns, such as the ability to recruit relevant profiles, to acquire and integrate other tech companies, or to deploy the solution in other countries.

  • Evaluate future technological investments necessary to resolve certain technological problems (often linked to the legacy) and mitigate risks related to activity operations or scalability.

  • DOCAPOSTE,a subsidiary of French Postal Group, has become a regular client over the past years, with several Tech DDs conducted prior to investments in tech companies and continues to trust BearingPoint Capital for their future investments: 
  • Jean-Baptiste MORIN, Head of Strategy and M&A for DOCAPOSTE, has been doing some Tech DD with BearingPoint Capital since 2020 for its main acquisitions. He considers BearingPoint Capital as “a very professional team producing comprehensive tech assessments for all kinds of deals, with a real ability to add local savoir-faire for cross border operations”. 

The risks associated with technology can be numerous, diverse, and well hidden, make sure to invest in a future unicorn and not a pony with our Tech DD.

Feel free to reach out to Jean-Charles Chevalier, Rémy Gaudic or Sébastien Prouvost for any question you may have about our TDD offer, our references or other further information.

Contact Us

BearingPoint Capital Team

Would you like more information?

Si vous souhaitez en savoir plus à ce sujet, nos experts sont à votre disposition.