Software Due Diligence - technology valuation
Software Due Diligence allows the status of technologies and development processes used to be evaluated. We support with insights that go far beyond the IT due diligence standard.
A Software Due Diligence with GAMBIT
Our software due diligence is not based on a pure code analysis. It is a tool-based analysis of all features, bugs and the development history, which gives the investor a basis for decision making.
A concentration of knowledge on a few employees is a major risk for the investor. Software due diligence therefore also includes tool-supported analysis of the distribution of knowledge in the development team.
GAMBIT not only considers the technologies used but also the processes of feature-s development. With these insights investment decisions can be made even more soundly.
Incomplete documentation makes efficient further development of the software difficult. With the discovery of the documentation gaps by our tool, you can make the seller a contractual obligation.
Software Due Diligence - Why is it so valuable?
Software Due Diligence deals with the analysis and evaluation of the intangible asset "software" and "software development" within the scope of company transactions. These examinations and valuations require distinctive know-how and are therefore carried out exclusively by very experienced and specialized consultants. Through interviews and the use of our sophisticated analysis suite, a comprehensive analysis of the software can be performed even under the time pressure of due diligence. With us, the investor can look behind the scenes of hundreds of thousands of cryptic lines of code.
It is advisable to carry out a kind of software handover due diligence after the closing in order to compare the developments and changes in the code and documentation with the state that was examined at the time of the software due diligence. Often many months pass between the software due diligence and the new owner taking over responsibility for the software. This helps to avoid the possibility that the product has not been adequately developed during this time without being noticed.
Thomas Pasquale, Managing PartnerDo you have questions about our Software Due Diligence?
+49 2241 8845-637
Software due diligence in M&A transactions
In general, due diligence is an analytical instrument to uncover the opportunities and risks of corporate transactions. Literally translated, the term from the business world means "due diligence". An important task of due diligence examinations is to determine the value of assets (assets).Significant corporate assets are now also in the areas of software and software development. Software due diligence deals with the expert valuation of these special assets.In addition to investors who require a valuation of software and software development for the purchase of companies or company shares, software due diligence has other target groups. These include business owners who are preparing to sell a company or who would like to get an overview of their current level of digitisation. Managing directors and executives, such as IT managers, can also use the instrument to obtain an overview of the status of the technologies and architectures used and the current software development projects. Last but not least, software due diligence is aimed at private equity houses, family offices, venture capital investors or auditors who need support in the context of M&A transactions and the determination of opportunities and risks.In summary, the goals of our software due diligence are
- Accurate determination of the technological level of the software architecture based on facts about its impact on the business
- Determine whether the software architecture is designed to meet current technology trends (e.g. cloud-ready)
- Find out whether the relevant developers are (namely) part of the transaction
- Ensure that software documentation is up-to-date and comprehensive (20+% of lines of code)
- Recognize where in the software bugs occurred most frequently or where only a few features could be implemented.
- Avoiding risks due to loss of know-how as a result of unplanned fluctuation
Professional analysis of software before corporate transactions
The technical Software Due Diligence by GAMBIT is an examination and evaluation which provides you with clear statements on the future viability and scalability of existing software assets. Not only for companies producing software but also for companies using self-developed software, software is an asset relevant for valuation. The future and digital readiness of software development processes - Agile, SCRUM - is also part of our analyses. Our service is particularly recommended if one of the following statements applies to you:
- You want to buy a company whose value creation is highly dependent on complex, individually developed software.
- You are about to buy a company that produces software products.
- You want to ensure that the application and further development of a potential takeover candidate's software can continue economically after the acquisition.
- You would like to have the quality and future viability of the software reliably and objectively evaluated down to code level.
- You are interested in whether state-of-the-art methods are used in software development and whether adequate documentation is available.
- You want to identify the relevant developers and ensure that they are part of the corporate transaction.
In all these questions GAMBIT is the right partner for you.
Unique approach to Software Due Diligence
At GAMBIT a Software Due Diligence is not only based on the expertise and experience of our consultants but also on AI support. By means of our unique technology and analysis suite we analyze software directly in the code. An algorithm correlates important aspects like features, development history, maintainability, extensibility and existing bugs. This allows a comparison to be made between the potential of the software, which the seller includes in his price request, and the technical-organizational reality.The analysis results are summarized by our experts in a comprehensible way in the form of a software due diligence report. Investors thus gain new insights to better evaluate upcoming transactions and their sustainability.Compared to classical IT Due Diligence solutions, the GAMBIT approach is unique in several respects:
- Greater business relevance, as factors such as expandability and ease of maintenance are also taken into account
- No pure technology consideration: process quality of software development is also analyzed
- Consideration of modern, experimental development methods including customer benefit
- Existing problems are expressed on a level that is also understandable for technically less experienced target groups (managers, investors)
Future-proofing of software
Focus on investmentsIn an increasingly digitalised business world, the areas of software and software development are becoming more and more important. This also increases the valuation relevance of software in the context of M&A transactions. With the Due Diligence Report by GAMBIT you will not only get transparency regarding the business applications used and, if applicable, self-made software solutions. You will also find out whether the architecture is designed in such a way that it can follow current technological trends and whether key employees of software development stay on board.Especially in case of upcoming investments in software companies or highly automated organizations, the following findings from our Software Due Diligence are also relevant:
- Maintainability of the software for trouble-free further operation
- Extensibility of the software with new functions for adaptation to changing conditions
- Interoperability of the software assets and integration ability into the own system landscape or product range
- Sustainability of the software in terms of networkability, performance, scalability and the use of new technologies (e.g. cloud)
With these assessment criteria, we contribute significantly to the future security of your investment.
Meinolf Schäfer, Senior Director Sales & MarketingDo you need assistance with a software due diligence?
+49 2241 8845-623
High relevance also in software development
Another significant, often neglected aspect of software due diligence is the processes in software development. From the point of view of due diligence, it is of secondary importance whether the company in question is a software company or a company with important business processes based on individual software. Rather, the following questions are in the foreground:
- Are requirements, functions and errors recorded in a structured manner?
- To what extent are users integrated into the defects recording process?
- Is there a professional planning for the implementation of new features?
- Are code changes properly documented?
- From a technical point of view, can new versions be realized, tested and rolled out in a short time?
- To what extent are the mechanisms for updates and upgrades of the software automated?
- To what extent are innovations oriented towards customer benefit?
Software Due Diligence by GAMBIT provides answers to these questions and thus creates transparency regarding the efficiency of software development. This examination can be carried out in particular within the scope of a Vendor Due Diligence (i.e. by the seller) in order to offer the potential buyer trustworthy information in the Virtual Data Room from the beginning.
Not only applicable in the context of M&A
The Software Due Diligence by GAMBIT does not only provide a factual basis for investment decisions. It is also suitable for one-time or recurring internal analyses of software and its development processes. Among other things, the AI-based approach enables the identification of features which cause a high development effort but hardly offer any customer benefit. In a combined view with the expandability and maintainability of functions, development budgets can thus be used in a much more targeted manner.In addition, GAMBIT offers a cost estimate for necessary investments for quality improvement. The portfolio also includes an AI prognosis which shows upcoming maintenance efforts in case of non-action. Last but not least, the effect and efficiency of initiated quality measures can be checked afterwards with the GAMBIT approach.Furthermore, our consultants identify the knowledge distribution of a software. On the one hand, risk factors like knowledge islands and missing coordinators can be identified. On the other hand, it becomes clear which additional know-how is required for the expansion of existing development teams.Ask for our offer now!You are interested in a Software Due Diligence with GAMBIT? In order to be able to make an individual offer, we need the following information from you:
- Type and number of repository systems used
- Code size (number of code lines)
- Age of the code in years
- Number of developers
- Type and number of ticketing systems used