For a long time, Tech due diligence (DD) in M&A activity was treated as a formality. It was mainly about risk mitigation rather than uncovering real value. Technology itself was considered a back-office function, rarely linked to the investment thesis, and hardly ever represented at the deal table.
That has changed.
Today, investors are using Tech DD to test the fundamentals of the value story itself:
Quality of earnings: Is revenue backed by scalable, reliable systems?
Scalability proof: Can the platform handle rapid growth or international expansion?
Multiple defensibility: Does technology strengthen competitive position and justify a premium at exit?
When done well, Tech DD builds conviction, underwrites the growth plan and strengthens valuation.
When done poorly, it introduces execution risk, slowing transactions, narrowing the buyer universe and compressing multiples.
At Redgrave, we view Tech DD through a leadership lens. Not simply what systems exist, but who is accountable for turning technology into value under pressure. For many small and mid-cap businesses, particularly outside pure-play tech, this leadership dimension is where the greatest upside, and the most material risk, now sits.
How Technology Shapes Value
Once technology is understood as part of the value story, the focus of Tech DD shifts.
Investors are no longer asking whether systems function; they are testing whether the business model is genuinely supported by them.
That requires technology leadership to move beyond describing infrastructure and clearly evidence outcomes that support the investment case.
As a result, buyers increasingly concentrate on:
Data integrity and reporting confidence, as a proxy for quality of earnings
Cyber maturity and governance, where weak diligence can delay or derail transactions
Platform scalability and integration readiness, particularly in buy-and-build strategies
AI-enabled operating leverage, beyond pilots or proof-of-concept activity
The credibility of the technology roadmap through to exit
In competitive processes, it’s the ability to connect these factors to the investment case that gives investors confidence that value extends beyond the systems on paper.
Future-Proofing for Tomorrow
Beyond current performance, Tech DD is increasingly a test of durability, whether the technology position will hold up as complexity increases and scrutiny intensifies through to exit.
At this stage, investors are less interested in what exists today and more focused on how the business copes when things change: growth accelerates, integrations stack up, regulation tightens, or cyber risk materialises.
In practice, this shows up in questions such as:
Can the organisation demonstrate operational resilience, not just baseline security?
Is AI being used to improve decision-making and efficiency, or does value rely on future delivery?
Will the architecture absorb growth and integration, or trigger re-platforming at the wrong moment?
Is data trusted well enough to support audit, diligence and exit scrutiny?
Is capability embedded across the organisation, or concentrated in one or two individuals?
Are regulatory and ESG requirements anticipated early, or addressed reactively under pressure?
Together, these signals can help buyers judge whether technology will remain an asset throughout the hold period, or quietly erode optionality at exit.
At that point, attention inevitably shifts from systems to the leadership responsible for delivering against them.
The Hidden Cost of the Wrong Tech Leader
With technology now very much a part of the equity story, leadership becomes the execution risk buyers scrutinise most closely.
Even with the right systems in place, the wrong technology leader can quietly undermine value, misaligning effort, slowing execution and increasing perceived risk under scrutiny.
In diligence, investors are testing whether technology leadership is genuinely aligned to the investment case, or simply delivering activity without commercial impact.
Common mis-hires tend to fall into familiar patterns:
01
The “enterprise CIO” who brings scale experience but moves too slowly for PE timelines
02
The “brilliant architect” who excels technically but struggles under commercial pressure
03
The “innovation-first” CTO who prioritises new capability while underestimating integration and cyber risk
These mismatches rarely fail loudly. Instead, they show up as lost integration windows, delayed synergy capture and management distraction at critical inflection points.
There is also a significant timing risk. PE-backed CEOs often recognise the need to upgrade technology leadership but defer the decision. Waiting 12–18 months too long allows technical debt to compound, slows execution and reduces optionality at exit.
Across our work with PE-backed businesses, the pattern is consistent: whether technology becomes a value lever or a drag is rarely determined by the roadmap. It is determined by the leader accountable for delivering it.
The Bottom Line
Leadership gaps are rarely fixable during diligence. By the time scrutiny begins, outcomes are already constrained.
Where technology leadership is strong, Tech DD becomes a source of confidence, reinforcing execution capability, strategic alignment and belief in the value story. Where it is weak or misaligned, issues surface under pressure, often at the point where optionality matters most.
Across PE-backed businesses, technology only becomes a value lever when the right leader is in place well before scrutiny begins.
