A Due Diligence Survival Guide: What to Expect (Part 1: Passing Architecture & Structural Product Scrutiny) [Nexus]

public procurement

This Spend Matters Nexus series on due diligence kicks off Nexus as its own subscription stream apart from PRO content.

The series is a survival guide on the due diligence process for sellers, especially all the areas outside of finance and accounting (though we’ll eventually get to this part of the process). And we hope that acquirers and investors — even seasoned corporate development, PE and venture types — will find it useful as well. We unfortunately know some buyers who could have spared themselves some headaches had they been as anal as we are in many of these areas.

Perhaps the biggest challenge that executives going through a fund-raising or transaction process face is that they are not adequately prepared for all the curveballs — many of the Astros batters facing the Nationals Stephen Strasburg’s recent loopers come to mind — that might get tossed their way in the due diligence process.

There are so many areas that investors and acquirers might decide to take an extra look at that even world-class “hitters” might not see them coming. And even those who think they are prepared for all the pitches might not fully anticipate the twists and turns the ball might take just before it hits the strike zone (we’ll stop with the baseball analogies, but with one of us coming from the North Side of Chicago, we’re empathetically giddy about our friends in Washington being able to claim victory in the World Series for the first time, turning around what initially looked to be a modest season).

The 2019 baseball Fall Classic aside, fully preparing for diligence is about practice (a topic we’ll explore later in this Nexus series), and it’s one that we ideally recommend companies rehearse — even though few will be prepared from “regular season” play alone at the level that ideally they should be at. Regardless, even those that do not practice sufficiently will stand to benefit from a comprehensive checklist about what to expect.

In Part 1 of our series, we’ll start first with an overall list of areas to consider from a diligence checklist perspective. Then we’ll immediately dive into what to expect around architecture and structural product diligence. (Warning: This is deep!) In the weeks to come, we’ll crawl out of the technology weeds as our exploration continues.

And of course throughout this Nexus series, we’ll aim to put a unique spin on the topic for procurement, finance and supply chain software companies, as these are the software segments we’re most experienced in scrutinizing — and occasionally preparing or dressing up for a process.

Let’s begin.

Jason Busch serves as Managing Director of Spend Matters Nexus, a membership, research and advisory organization serving technology acquirers (private equity, corporate development, etc.) and CEOs in the procurement and finance solutions marketplace (including contract management, B2B marketplaces/connectivity, indirect procurement, services procurement, direct procurement, commodity management, payment, trade financing, GRC/third-party management and related adjacent sectors).

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