In today’s competitive M&A landscape, Tech DD is not a box-ticking exercise – it’s a strategic value lever. Done well, it can accelerate investor conviction and confidence, and in turn, your company valuation. Done poorly, it can derail a transaction or erode value post-deal.
Duncan Ramsay in ECI’s Commercial Team outlines his views on making Tech DD a source of competitive advantage for your business:
1. Tech as a strategic differentiator
Investors are increasingly tech-focussed. They want to understand not just whether your systems work, but how your technology enables growth, resilience, and innovation. A robust Tech DD process should validate and help explain the importance of technology to your business. In order to make the most of this process we recommend you:
- Link technology to business strategy: Can you clearly articulate how your tech stack supports your commercial model? Not only will this demonstrate differentiation to the end investor, but it also helps ease your DD process. If providers can understand the purpose of tech within the business and what the infrastructure looks like, they can start asking the right questions sooner.
- Demonstrate scalability and resilience: Are your systems ready for growth, or will they buckle under pressure? What happens if something goes wrong? If you can tie your tech roadmap to your growth projections it will bring to life how tech underpins your business potential, while demonstrating your ability to mitigate impacts of unexpected issues helps investors get comfort that even if something does go wrong, you can deal with it.
- Showcase innovation readiness: What steps have you taken to drive benefit from AI, automation, or new data capabilities? It will be important to highlight the impacts of what you have done to date, and your readiness to push further, but also to show the process for how your company innovates, how your teams work together to deliver, and how it translates to ROI.
Companies that can answer these questions with confidence stand out in a crowded sales process.
2. New frontiers
Make sure your Tech feels future-proofed. Here is where we have seen the biggest growth in focus in Tech DD in the last five years:
- Cybersecurity: Are you resilient against ransomware, insider threats, and third-party breaches? Can you evidence your risk management processes and protections in place? Can you show a track record of testing (pen tests, phishing, etc) and the actions you took to mitigate findings? How have you responded to prior incidents, and what did you change in your defences as a result?
- AI readiness: How have you deployed AI to date, what benefits have you seen and where do you plan to go next? Have you documented your AI strategy? How do you manage risks that come with AI usage? Are your data governance and model training practices robust enough to support AI use cases? At ECI, AI is part of our investment committee discussions. Being able to show that AI is something considered and with real applications will be beneficial. Your investor is likely to be assessing whether AI is an opportunity or a risk to your business, so it is important to demonstrate how it is enabling rather than threatening value creation.
These areas are now standard in DD frameworks, and ignoring them can be a red flag.
3. People matter: Beyond the stack
Technology doesn’t operate in a vacuum. Investors understand the people behind the platform ae the key to achieving their growth aspirations. Questions are likely to include:
- Alignment: Is the technology department relationship with the broader business collaborative and strategically aligned? Are you an enabler of the strategy, or a resource that is drawn upon to deliver?
- Structure, skills & capabilities: How do you structure your team? What skills and capabilities do you have; and how does this align with customer and business value creation?
- Team experience: What challenges has your team faced in the past and how did they overcome them? How do those past challenges align with the challenges the business has in front of it today?
- These human factors can be leading indicators of future adaptability – or risk.
You should also think about your people when deciding the characters in the room during tech DD. Some are likely to try and answer what they think investors want to hear, some may not give enough detail, whilst others get lost in it. The CTO’s role will be to manage these different approaches, chair the meetings to make sure expectations are clear, and thinking about who will be most effective to answer across which areas. Pre-preparing material long before a deal process is a way of giving yourself the best chance of success.
4. Practical steps to get ahead now
Tech DD is an area where you can start work long before it is needed. Getting the information on a page will likely prompt useful questions that you can then resolve prior to getting started in the pitch process. Here are some useful areas to consider ahead of time:
- Run a Tech DD rehearsal 6 – 12 months before exit. Identify gaps early.
- Map your tech to your strategy on a single slide. Make it easy for buyers to connect the dots.
- Document your wins – from uptime metrics to successful migrations. Evidence builds trust.
Invest in your people. If you don’t think that your team is as strong or as aligned as you would like, now is the time to bring in the right skills and attributes, as you won’t want to be hiring during a sales process.
Tech DD isn’t just about risk mitigation – it’s about value creation. By treating it as a strategic opportunity rather than pure diligence, you can turn scrutiny into strength.
