Whilst it is more common that we are engaged for buy-side due diligence, sometimes a sell-side process can be worthwhile. This is often the case where technology is central to the business proposition and the vendor believes that they can attract a larger/better pool of potential investors by doing at least some of the legwork.
These are perhaps some of our trickiest engagements. Our expertise lies in being brutally clear about potential issues with a business’ technology and then helping to fix them. Sell-side due diligence is about providing a truthful and balanced assessment of technology which includes making clear risks which have been identified.
But a set of “risks” for technology is not typically the most appealing aspect of an investment pitch. We therefore work hard to ensure that the path to address risks is clear to give confidence to investors that the business is on top of things.
Sometimes this is already the case and sometimes our work involves helping get technology match-fit before coming to the market. This is when risks float around unwanted by anyone in the corporate fog suddenly need to be crisply drawn. Open-ended conversations have to be converted into firm mitigation plans. It fits into the category of “hard but good” things to do with a workday.
In many cases, we help our clients realise that they in better shape than they thought (or know how to express). A recent client successfully won a client of a completely new and bigger scale as well as a pipeline of similar deals. Capitalising on this was core to the investment case, but would also multiply the load on their technology platform hugely. Yet our client had no way to show that their platform could handle this. This was largely because good business planning work and good technology scaling and testing were not linked.
Although not identified as part of our scope at the beginning of the work, we knew that anyone doing due diligence for an investor would (or should) pick up on this. It was significant enough to that potential investors might not proceed to their own due diligence. At best, it would result in lower offers.
We were able to work across different parts of the business to identify pockets of data on levels of business demand, technology platform performance and ability to scale. We pulled these data together and provided new views. This meant showing a conservative approach to mapping business volumes to load on the platform. We then combined actual year to date platform performance with load testing data for planned enhancements. All of this was shown against the investment case business volumes.
