Organizations rely on the process of due diligence during a business transaction to uncover questionable or unsavory details. When the due diligence inquiry process centers on technology and intellectual property, the buyer is often interested in factors that might give them pause during the transaction. It is wise to thoroughly examine an organization’s intellectual property and the steps they’ve taken to protect their trade secrets.
While every transaction is unique, prospective buyers should carefully investigate three crucial questions as they relate to technology and intellectual property:
- How has the organization ensured the privacy of its information? Data security is a key aspect of any organization’s value, especially in today’s digital world. Any advantage they’ve gained through a process improvement, new product or manufacturing enhancement can quickly deteriorate if the material is not shielded from competitors. When negotiating a purchase, it is critical to examine the level of security in the company. This can greatly influence the overall value of the organization.
- Are there technology workarounds in place? Organizations can encounter issues in systems they use every day. Whether these are bugs, glitches, viruses or other defects, they can impact the company’s productivity. Usually, the business will develop fixes or workarounds to ensure that employees can stay on task. It is crucial to seek this information during the due diligence process.
- Does the seller hold the appropriate licenses for critical software? From task management systems and human resources databases to content management systems and email, every organization relies on a series of business systems. Past that, some software and technology require licenses for use. Through the process of due diligence, it can be determined whether the seller has acquired appropriate, legal licenses.
Many organizations rely on mergers and acquisitions to grow the business into new areas or expanding markets. It is crucial that buyers take the time to follow the process of due diligence to ensure that no negative information remains hidden.