M&A Software Due Diligence Checklist

Asking the right questions is key to understanding the risks of the technology you're acquiring

The potential risk and exposure posed by M&A transactions demand thorough and robust due diligence practices. When an acquisition involves software, it's critical to ensure that associated risks are identified and fully understood. Knowing what questions to ask when performing due diligence is key to avoiding potential risks and legal complications. This is especially true for the acquisition of software, which more often than not poses a multitude of risks that may not be immediately evident.

What to worry about in M&A transactions

Software due diligence, when performed adequately and effectively, should encompass the examination of the target across various facets. Some key areas of focus include:

• Technology: Since software acquisitions base their value on the software and its IP, examining it for potential quality, legal, and security risk is critical to ensuring the overall worth and viability of the transaction.
• Legal: Failure to perform adequate due diligence can result in lawsuits, a negative impact on business reputation, and loss of IP.
• Security: Failure to do a full risk profile can result in data breaches, regulatory issues, and unplanned remediation costs and activities.
• Software quality: Quality risks may not be immediately obvious, but they can wreak havoc.