Technical Due Diligence is driven by needs of the client
Framework to guide the identification and selection of high-potential targets
14th Degree Azimuth Advisory has a robust, structured and proven framework for identifying M&A targets in the Information Technology (IT), Artificial Intelligence (AI), and Cloud space. This is coupled with a multi-faceted approach that balances strategic, operational, financial, and cultural considerations followed by a seasoned and tenured team.
Strategic Fit and Market Position Identification
Industry Position
Alignment with Corporate Strategy
Alignment with Corporate Strategy
Identify targets with a strong position in growing segments
Alignment with Corporate Strategy
Alignment with Corporate Strategy
Alignment with Corporate Strategy
Evaluate how the target aligns with your strategic objectives
Growth Potential
Alignment with Corporate Strategy
Competitive differentiation
Assess the target’s potential to contribute to long-term growth.
Competitive differentiation
Alignment with Corporate Strategy
Competitive differentiation
Determine whether the target offers unique IP,
patents, proprietary algorithms, or a customer base that provides a distinct advantage over competitors.
Technology and Innovation assessment
Core Technology
Product Development and Roadmap
IP Portfolio and R&D Pipeline
Assess the relevance and scalability of the target’s core technology.
IP Portfolio and R&D Pipeline
Product Development and Roadmap
IP Portfolio and R&D Pipeline
Evaluate
the depth of the target’s intellectual property portfolio,
including patents, proprietary algorithms, and
data sets.
Talent and Engineering Depth
Product Development and Roadmap
Product Development and Roadmap
In fields like AI and cloud computing, the talent pool within a target company is often as valuable as the technology itself.
Product Development and Roadmap
Product Development and Roadmap
Product Development and Roadmap
Examine the product roadmap, looking for high-growth areas
Customer Base and Market Share
Customer Retention and Satisfaction
Market Share and Competitor Positioning
Market Share and Competitor Positioning
Review customer churn rates, satisfaction scores, and testimonials. High retention and satisfaction in the cloud and AI space suggest a solid product-market fit and service reliability.
Market Share and Competitor Positioning
Market Share and Competitor Positioning
Market Share and Competitor Positioning
Understand the target’s market share and its position relative to competitors. This insight is especially important in fragmented markets where an acquisition could position your firm as a leader.
Customer Mix
Market Share and Competitor Positioning
Cross-Selling Potential
Look for a diverse customer base, ideally with high-quality customers from industries like finance, healthcare, or government that are reliable adopters of IT and AI solutions.
Cross-Selling Potential
Market Share and Competitor Positioning
Cross-Selling Potential
Assess the likelihood of cross-selling opportunities. A strong customer overlap could indicate the potential for future revenue growth by introducing existing solutions to a new client base
Operational and Integration Feasibility
Operational Synergies
Data Privacy and Compliance
Operational Synergies
Evaluate the operational synergies the acquisition could bring. In cloud and AI companies, synergies often come from integrating technology stacks, sharing R&D resources, or streamlining customer service functions.
Cultural Alignment
Data Privacy and Compliance
Operational Synergies
Assess cultural compatibility, especially in highly specialized areas like AI. Misalignment in team dynamics, innovation philosophy, or risk tolerance can negatively impact post-merger integration
Integration Complexity
Data Privacy and Compliance
Data Privacy and Compliance
Analyze how easily the target’s technology and infrastructure can integrate with your existing systems. For AI/IT/cloud companies, consider the alignment of tech stacks, APIs, security protocols, and data governance practices
Data Privacy and Compliance
Data Privacy and Compliance
Data Privacy and Compliance
Check for alignment on data handling, privacy regulations (e.g., GDPR, CCPA), and cybersecurity standards. This is especially critical in cloud and AI-focused acquisitions where data privacy is paramount.
Due Diligence and Valuation Approach
Technology Due Diligence
Technology Due Diligence
Technology Due Diligence
Deploy our specialists to assess the target’s technology in-depth, including its scalability, resilience, and intellectual property. This phase is particularly crucial in AI acquisitions, where underlying algorithms may hold hidden risks.
Valuation Framework
Technology Due Diligence
Technology Due Diligence
Use valuation models that reflect both current financial performance and future growth potential. In high-growth sectors like AI and cloud, this could involve a discounted cash flow (DCF) model, market comps, or precedent transactions that capture the premium on technology innovation.
Financial Due Diligence
Technology Due Diligence
Financial Due Diligence
Conduct a thorough review of contract liabilities, subscription renewals, and profitability projections.
Post-Acquisition Strategy
Integration Roadmap
Performance Metrics and Milestones
Talent Retention and Development
Develop a detailed post-acquisition integration plan that addresses how to merge technology stacks, sales channels, and back-office functions.
Talent Retention and Development
Performance Metrics and Milestones
Talent Retention and Development
Create programs to retain and integrate critical personnel. Provide clear career development paths and cultural onboarding.
Performance Metrics and Milestones
Performance Metrics and Milestones
Performance Metrics and Milestones
Define post-acquisition performance metrics and milestones to track the acquisition’s success, such as revenue growth, product integration timelines, or customer retention rates.
Product and Service Synergies
Performance Metrics and Milestones
Performance Metrics and Milestones
Identify and execute on cross-selling and upselling opportunities, bundling new technologies to increase customer value and open new revenue channels.