Technical Due Diligence (TDD) is the cornerstone of risk assessment in any technology-centric investment or acquisition. It provides investors or buyers with a deep understanding of the software architecture, code quality, scalability, security, and team capabilities of the target company.

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Technical Due Diligence is a structured evaluation of a company’s technological assets and processes conducted before a merger, acquisition, or investment. Unlike financial due diligence, which focuses on balance sheets and forecasts, TDD dives into the inner workings of software products, engineering workflows, and infrastructure.

Key elements analyzed during TDD include:

• Codebase quality and maintainability
• System architecture and scalability
• Infrastructure and DevOps maturity
• Data privacy and security controls
• Technical roadmap and team organization

TDD can be initiated by buyers (classic due diligence) or by sellers (Vendor Due Diligence) to pre-emptively address technical red flags.

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In technology-heavy deals, the majority of asset value is tied to the software, infrastructure, and development team. TDD helps to:

• Identify technical debt that could hinder growth or require costly remediation
• Validate product scalability and performance under load
• Assess security posture and compliance readiness (e.g. GDPR, SOC 2)
• Evaluate engineering culture and delivery capacity
• Mitigate post-acquisition surprises, reducing integration risk

TDD provides buyers with the confidence to proceed, or the leverage to negotiate better terms if risks are uncovered.

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