Software due diligence may turn up unanticipated surprises for pre-close consideration, but the findings are just as critical to informing the post-close integration and plans. Deals hinge on a business case that may need to be revisited if the diligence uncovers issues adding up to a pile of technical debt that will significantly impact integration or the release of a new product, or even cause a delay of closing until the seller addresses. A business unit absorbing the acquisition runs the risk of being burdened by inherited technical debt if it’s not discovered pre-close, but significant issues identified in due diligence can be accounted for as part of the deal—costs that may be passed onto the seller as part of the transaction.
In conclusion, software due diligence is a critical aspect of any M&A transaction involving software assets. The findings of the due diligence process are essential in informing the post-close integration of the target's software, ensuring that the acquired software is secure, compliant, of high quality, and generally not overburdened with technical debt. By conducting a thorough software due diligence process, acquiring companies can reduce the risk of future technical issues and maximize the chances of a successful acquisition.