In today's competitive private equity environment, technical due diligence plays a crucial role in ensuring successful acquisition and integration of add-on tech assets. This case study article illustrates how Intium’s technical due diligence services enabled our private equity client and its portfolio company to execute their value creation strategy by evaluating an open source CRM platform, facilitating strategic merger and growth, mitigating risks, and creating long-term opportunities.
In This Buy-Side Due Diligence Case Study
“The report helped me be more informed in the decisions leading up to the investment and the value creation period. The team and I read the report cover-to-cover, with some sections re-read multiple times. We still find ourselves turning back to the report for value creation ideas.”
– CEO, Portfolio Company
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Technical Due Diligence Outline
The technical due diligence provided our client and its portfolio company with comprehensive insights for making an informed acquisition decision and maximizing value creation opportunities for an add-on target they were looking to acquire.
Key deliverables included:
Evaluating the technology and business landscape of the target company
Understanding any potential IP risks and vulnerabilities exposed by extensive open source software usage
Outlining staffing and outsourcing strategies
Providing a comprehensive platform gap analysis
This thorough evaluation enabled our private equity client and its portfolio company to innovate on their existing offerings, achieve faster time-to-market for new offerings, and enhance their value proposition to customers.
Private Equity Client and Platform Company Overview
Our client is a US-based private equity firm focused on growing middle-market businesses in the technology, business services, and education sectors. The firm typically deploys $20-$50 million per transaction and seeks majority or substantial minority positions through leveraged buyouts, management buyouts, and growth equity structures. With an emphasis on strategic growth in tech-driven markets, the firm specializes in identifying and acquiring high-potential businesses that can benefit from operational improvements and technology integration.
Their portfolio company is a CRM and business intelligence (BI) solutions provider serving the wholesale distribution industry. By leveraging the target company's open source CRM platform, the portfolio company aimed to expand its integrated solution offerings for CRM and BI. This expansion was focused on enabling clients to gain actionable insights, streamline sales processes, and make data-driven decisions that enhance profitability.
About CRM Target and Technical Due Diligence Objective
The target company provided an open source CRM platform, catering to both a large base of open source users and a smaller group of paid customers. The client saw this as an opportunity to expand their portfolio company’s offering. The objectives of the technical due diligence included:
Assessing the end-to-end technology setup, including architecture and IT infrastructure, to ensure scalability and alignment with the client's goals
Identifying potential IP risks associated with the open source elements of the platform
Establishing the right talent, knowledge transfer, and outsourcing strategy to support future platform development and new offerings
Intium collaborated closely with the client and their portfolio company to evaluate the target's software, identify gaps, and provide recommendations to maximize the value of the acquisition.
Key Technical Due Diligence Findings and Results
Intium’s detailed technical due diligence enabled the portfolio company to perform an efficient post-merger integration, accelerate product innovation, boost sales growth post-acquisition, and implement a growth strategy, thereby enhancing value creation. Key takeaways included:
Accelerated Innovation
The portfolio company successfully released a new product offering within four months of acquisition, leveraging insights gained during the technology due diligence. This rapid innovation allowed them to gain immediate value from the acquired CRM platform.
Sales Boost Post-Acquisition
Shortly after the release of the new CRM offering, the portfolio company saw a boost in sales, with ten installs made near or immediately after the release. This success highlighted the potential for the expanded product line.
Staffing and Outsourcing Strategy
Intium provided a clear staffing plan and outsourcing strategy to support rapid platform development. This ensured that the portfolio company could efficiently hire the necessary talent to accelerate growth and meet ambitious timelines.
High Code Quality
A deep assessment of the target’s codebase helped Intium make recommendations that maintained the platform's code quality, ensuring long-term stability and scalability post-acquisition.
IP Risk Mitigation
The use of open source components introduced potential intellectual property risks. Intium's thorough analysis helped identify and mitigate these risks, ensuring the acquisition was secure and that future development would proceed without legal challenges.
“ We wanted a go/no-go decision and on top of that Intium provided us with a comprehensive and deep impression of the Target - an extra package including notable and critical knowledge of what’s to come post acquisition. We are extremely happy with the acquisition and Intium’s evaluation! “
- CEO, Portfolio Company