Need: Due Diligence
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Senior Advisor To Optimize Software Composition Analysis Strategy
Service Area: Human Capital
Client Type: Upper-Middle Market PE Firm
Service Provider Type: Senior Advisor
Industry: Technology – Software
The Need
Expert Guidance in Software Composition Analysis
An upper-middle market PE firm required expert insights into the Software Composition Analysis (SCA) sector, focusing on Application Security Testing (AST). They sought a senior advisor to analyze the market, competitors and product suite, guiding potential strategic acquisitions.
The Challenge
Deep Market Analysis within a Tight Timeframe
The PE firm needed a comprehensive market study of the application security space, specifically SCA. The challenge was to gain a detailed understanding of market segments, key players and competitors, with actionable insights on the target company’s position and growth opportunities.
How BluWave Helped
Connecting a Seasoned Expert in Application Security
BluWave responded by engaging a senior advisor with extensive experience in the AST space, including SCA. The advisor, having previously served as a VP of security strategy, possessed both technical acumen and strategic insights into the industry’s dynamics and key players.
The Result
Informed Decision-Making for Potential Acquisitions
The senior advisor delivered a comprehensive report within a 7-10 day sprint, providing a detailed analysis of the application security market. This report included breakdowns of the TAM, competitor analysis and strategic acquisition opportunities, equipping the PE firm with essential information to make informed investment decisions.
He reads everything you send to him; he’s very informed about the space – he was able to discuss things at a technical level and at an overall strategy level. He could tie the big picture to the technical details. He also had a great view on technical players. Best we have worked with so far in terms of senior advisors for diligence.
-Partner at PE Firm
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IT Due Diligence: Technology, Software Industry
When a private equity firm is evaluating an acquisition target, they perform thorough due diligence before making any decisions.
One part of the due diligence process that tends to come later in the process is information technology (IT) due diligence. While important in any industry, this practice is particularly apropos for companies in the technology software industry.
“For companies that have kept up, they can have a significant competitive advantage,” BluWave Head of Technology Houston Slatton says. “But for companies that haven’t embraced technology or managed it well, it can become a liability or a risk to their operations.”
READ MORE: What is Commercial Due Diligence?
What is the IT Due Diligence Process?
Here are the top-level steps involved with IT due diligence:
- Preparation
- Information Gathering
- Asset Evaluation
- Contract Review
- Risk and Opportunity Identification
- Recommendations
READ MORE: What is IT Due Diligence?
IT Due Diligence for Technology Software Companies
Here are how each of those steps could apply to due diligence being conducted on software companies:
Information Gathering
Gathering information is a rigorous process involving deep dives into the software’s architecture, databases and development practices. This phase assesses the company’s technical assets and the quality of its codebase, exploring aspects like scalability, maintainability and technical debt.
Asset Evaluation
In asset evaluation, the focus shifts to the software itself. What is the state of the product’s lifecycle? Are the technologies used up-to-date and supported? The evaluation also reviews the company’s intellectual property portfolio for patents, trademarks and copyrights that protect its innovations.
Contract Review
The contract review scrutinizes agreements with customers, vendors and partners. For software companies, this could involve licensing agreements, open-source software dependencies and third-party integrations that are essential for the company’s products and services.
Risk and Opportunity Identification
Identifying risks requires an understanding of the regulatory environment, especially for data privacy and security. What are the potential compliance liabilities? Conversely, where are the opportunities for innovation or market expansion? This step often reveals how IT can be a growth enabler or a liability.
“If you don’t use the tools well – if you don’t maintain them – a good IT diligence report is going to highlight those issues, but also will highlight those as recommendations or opportunities to drive value in the business post-close,” Slatton says.
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Recommendations
The final recommendations are a strategic mix of immediate actions and long-term plans. For a technology software company, this might include advice on enhancing security, improving system integration or investing in new technologies to keep the company ahead of the curve.
The IT due diligence process is integral to understanding the true value of a technology software company. It’s not just about identifying what works and what doesn’t – it’s about uncovering how the technology can drive the company forward.
Private equity firms that don’t perform thorough IT due diligence may find themselves facing unforeseen challenges down the line. But those that prioritize this step can use it to guide their investment strategy, uncover new opportunities, and ultimately, ensure that their acquisition is set up for success in the rapidly evolving tech landscape.
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For expert guidance through the IT due diligence process, reach out to BluWave. Our research and operations teams can connect you with the best IT due diligence experts in the industry, handpicked for your situation.
“The specialized providers in the Business Builders’ Network have in-house employees who focus on doing these types of assessments for investors,” Slatton says. “They’re seasoned technology professionals who know how to quickly assess an organization through the lens of private equity firms and other acquirers.”
Start a project with us today and we’ll provide a short list of service providers in less than 24 hours.
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Strategic Buy-Side Search in Healthcare Services
Industry: Healthcare Services
Service Area: Commercial Due Diligence
Client Type: Lower-Middle Market Firm
Service Provider Type: Buy-Side Advisory Firm
The Need
Multi-Site Roll-Up Strategy in Healthcare Services
A lower-middle market private equity firm, with a successful history in executing multi-site roll-up strategies, sought to delve into the healthcare services sector. Their vision was clear: identify a healthcare practice that resonates with their investment thesis, marking the inception of a broader roll-up strategy. The ideal acquisition would be a multi-doctor practice in the Midwest, South or Southeast, boasting more than $5 million in annual net collections and an entry EBITDA above $2 million.
The Challenge
Precise Buy-Side Search
The challenge was twofold: identifying a healthcare practice that not only met the stringent financial criteria but also aligned with the firm’s strategic vision for a multi-site roll-up. The firm sought a partner who would reinvest back into the business, ensuring a synergy that would fuel the envisioned growth and expansion. The search required a nuanced understanding of the healthcare services sector, coupled with a strategic approach to identify practices that resonated with the firm’s investment thesis.
How BluWave Helped
Facilitating a Connection Tailored to Strategic Success
BluWave utilized its extensive network to connect the firm with a specialized buy-side advisory firm. This partnership was instrumental in navigating the complexities of the search, leveraging deep industry experience and a nuanced understanding of the private equity landscape. The advisory firm’s strategic approach and geographical insights were pivotal in identifying healthcare practices that aligned with the firm’s vision and investment thesis.
The Result
Poised for Transformative Growth
Through the connection facilitated by BluWave, the firm was empowered to execute a strategic buy-side search that resonated with their investment thesis. This partnership has set the stage for the identification of promising healthcare practices, ready to be woven into a transformative multi-site roll-up strategy that echoes the firm’s vision of growth and success in the healthcare services sector.
This was a good firm to work with. They were organized and professional. We would recommend them to other clients.
Partner at PE Firm