Many tech companies haven’t fully prepared for an acquisition. When the time comes, are you ready? Grant Thornton LLP shares the six best due diligence practices.
3. The due diligence process
The acquirer will now look closely
at your company:
• Financials
• Operations
• Systems
• Performance
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4. Issues can lower the price
Multiple issues can
suggest more
systemic problems,
leading to a
drastically lower price
or, in extreme cases,
deal cancellation.
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5. Preparation is key
Find out what you need to know now
— it's time to take action.
Next up, the 6 critical areas of focus in
preparing for acquirer due diligence.
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Read the full article>
6. #1: Financial due diligence
How robust are your financials?
Key areas to consider:
• Working capital trends
• Receivables
• Active clients
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• Sources of value
• Financial systems
• Accounting methods/policies
TIP: Base your analysis on billings data to show the
tie to financials; properly account for credit memos.
7. #2: Tax due diligence
Key areas to consider:
U.S. and foreign income taxes
State and local taxes/Sales tax
Unclaimed R&D tax credits
Accumulated NOLs for federal income tax
Corporate structure and change-in-control agreements
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How complete and current are your
tax records?
TIP: Prepare detailed records over a range of years.
8. #3: IT due diligence
Are your IT infrastructure and systems a potential
integration obstacle — or even a business risk?
Key areas to consider:
• Network architecture
• Use of cloud services
• Information flows
• Capacity
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TIP: Proactively flag any platforms, functions or
strategies that may pose challenges. Read more>
9. #4:Operational due diligence
Can your company deliver the expected
market value post-acquisition?
Key areas to consider:
• Software/intellectual property
• Confidentiality policies
• Key employees
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• Documentation
• Software release calendar
• Mix of direct sales/resellers
TIP: Be prepared to share details on product development,
launches and coding.
10. #5: HR due diligence
Will the buyer be able to retain key employees
and their client relationships and institutional
knowledge?
Key areas to consider:
• Effective communication
• Proactive outreach
• Recruiting
• Compensation packages
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TIP: Identify and communicate with key employees.
11. #6: Cultural due diligence
Are values and culture a good fit?
Key areas to consider:
• Communication
• Transparency
• Inclusion
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TIP: Identify the key cultural attributes of the acquirer and
seller to highlight commonalities and resolve differences.
12. Be proactive
Every facet of your
company’s operations –
the underlying financials
as well as individual
functions, systems and
performance – will be
under the magnifying
glass. Start preparing
now.
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13. Marc Chiang
Partner
Transaction Advisory Services
Grant Thornton LLP
415.318.2206
marc.chiang@us.gt.com
Steven Perkins
Managing Director
Technology Industry Practice
Grant Thornton LLP
703.637.2830
steven.perkins@us.gt.com
InformationContacts
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Ready to start your own pre-
deal due diligence review?
Contact Steve or Marc today.