From The Due Diligence Show (Episode 1), specializing in technical due diligence, the experienced team at Thought Source Consulting take you for a look behind the scenes at the art of performing technical due diligence on companies and products for M&A projects.

Adam Jaques: Welcome, everyone. Welcome to the deal room. It’s the team here from Thought Source and we’re doing something that we’ve actually wanted to do for quite a long time and that’s create a video series, a podcast series depending on how you’re listening to it or watching it all about something that we do on a day to day basis. M&A, Technical due diligence or tech DD or tech due diligence, whatever you want to call it. It’s what happens when one company wants to buy a technology or a product, that’s focused more on technology and we’re here to talk about it. We’re here to talk about behind the scenes, you know, look beyond the curtain as to what goes on because it’s a bit of a secret?

Luke Silcock: Well, it’s a bit of a secret club. There’s some code words. Every deal will be known as a code word. Obviously, it needs to be maintained with a certain amount of secrecy as we’re talking about large amounts of money being spent. Whether you’re over the wall or not, as one of the key phrases that’s often used. Tell us about what being over the wall is like Andrew.

Andrew Borzycki: That’s one of those things where we’re talking about huge amounts of money at stake in a time sensitive, market sensitive way. It’s the sort of thing that you need to make sure that only the right people need to know and that’s what over the wall means – if somebody is aware of what’s going on taking part in the discussions, they’re over the wall. If somebody is not aware of it, then they’re not over the wall. And that’s a good segue into M&A as it is something that’s can really, really change the course of a company’s history when it’s done well, or when it’s done badly. It’s the sort of thing that has really dramatic implications to a company’s future. And when we’re talking about M&A and due diligence, typically, you may think that’s related to finance and legal only. All of those things are really important because lots of money is changing hands. So, you want to make sure it’s all done in a legitimate legal way. But we’re focused on the technology part of it. Technology is running our world and this is very much what the core of these companies actually do. Legal and finance are about the compliance making sure everything is done in a compliant way, but their technology is what the company actually does and typically why you would actually want to buy a company. That’s where we have a lot of our focus.

Adam Jaques: Now we’ve had quite a lot of experience with these types of projects. We’ve probably done more than 40 around the world. Don’t let our accents fool you. Our clients are mainly outside of Australia and working on projects of all different sizes from a couple of million dollars, frankly, all the way up to the billions, is what we’ve done. And really, it’s not talked a lot about what happens behind the scenes and we wanted to create these videos and these podcasts to not only show you what happens behind the scenes, but also educate you because you might be going through this yourself. You might be looking at buying a technology looking at buying another company or trying to sell your company. You might be a startup that’s out there, might be a large company that’s out there looking to sell a technology portion of your company, and you’re looking for some advice as to what actually happens. We’re going to take you through that through the video series. We’ve got lots to talk about and different stories to tell. We’re not going to be too specific about the stories as there is a bit of confidentiality. We’ve got to be mindful of there, but really telling you about the process and what we go through when it comes to doing technology due diligence products, and then integration once the company has actually been acquired.

Luke Silcock: Well actually it’s for buyers and many of the clients that we’ve worked with over time, there’s some jargon and I’ll be throwing a bit of jargon into our series. And the tech tuck in is where an established technology company that has a decent customer base, and a product portfolio is buying another tech piece that will complement its product portfolio. They want to make it stronger, make it more successful in the market and hopefully enable some cross sell into an existing customer base. Andrew, what’s your favourite?

Andrew Borzycki: I like bringing in a going concern and Acqui Hires. Bringing in a going concern is the more common one where you’re like this company. It’s a fully-fledged running independent business and bringing them in to really help expand what your company can do. The other one is an Acqui Hire where you want a particular person so who has a very small company, but you want these people so that’s why you’re actually bringing those on board. And that’s a much more personal oriented way of acquiring a company.

Adam Jaques: We’re going to explore the dangers of the logo slide. Don’t be taken in just the PowerPoint.

Luke Silcock: I mean every company has a slide of all these impressive logos of their customers. Well, the people that have perhaps at some point visited their website, or maybe they’ve driven past on the way to work.

Adam Jaques: There are some claims, and then we get to the evidence, but then we’ll introduce our own bit of jargon. We speak about the go to green. We’ll find some positives, we’ll find some negatives on the diligence journey, but then we’ll put together our findings, and our bit of jargon is the go-to green. You want to calculate what the total cost of acquisition is. And you want to have a good appraisal of that as you parting with the big lump of cash that’s associated with an acquisition

Andrew Borzycki: And an acquisition is a big exciting activity, but you’ve got to have be grounded so that you don’t get caught up in what we like to call deal fever. You want to make sure that you actually check everything that it’s all good. But there’s a really creative element as well in terms of when you’re looking at what the future may be. All of these things need to be can be dealt with and we’re going to cover a whole lot of these in our series

Adam Jaques: Deal fever is a great a great phrase. Deal glow is another one where people get excited about the fact that they’ve come a certain way to buying a company and they just want to get it done. They know. They’ve seen the PowerPoint. Now we’re the guys that come in to determine that here’s more than that. That’s why we’re talking to you guys about the fact that there’s actually evidence that we need to get behind the scenes. To make sure that we go beyond that deal that deal glow, that deal fever. We want to see deals for what they actually are – highly informed business building by taking a very calculated risk. All right, guys, I’m excited about the series. I think we’re off to a good start.



The Thought Source team have produced a video series covering the "behind the scenes" of performing technical due diligence for M&A projects.

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