Navigating the complexities of mergers and acquisitions (M&A) in the software industry requires a thorough understanding of the software due diligence process. Ensuring that the software involved is secure, robust and scalable, while also aligning with business growth objectives, is crucial.
Based on RSM’s extensive experience, the following frequently asked questions focus on the key aspects of software due diligence, from identifying common security vulnerabilities to evaluating the skills and talent necessary to support future growth. By addressing these critical areas, companies can better prepare for successful M&A transactions and safeguard their investments.
What are the most common gaps RSM sees when it comes to software security failures?
Open-source software packages are often not well maintained, creating uncontrolled security risks and leading to technical debt. Additionally, infrastructure is frequently presumed to provide security, which can result in overlooked vulnerabilities. Security is typically not included as part of the code coverage or testing protocols, further contributing to potential security failures.
What are some examples of security vulnerabilities commonly found during software due diligence?
Vulnerabilities include cross-site scripting resulting from unprocessed inputs and exposed web hooks that can be exploited by attackers. Additionally, misconfigured cloud infrastructure often leads to security gaps, and outdated libraries or frameworks frequently harbor unaddressed security vulnerabilities.
What steps can mitigate risks and ensure compliance with industry standards?
A process should be established to regularly manage and update existing tools to mitigate risks and ensure compliance. In addition, ongoing code scans and remediation processes should be integrated into the software development life cycle. Developers should also receive training on common security vulnerabilities, such as those outlined in the OWASP Top 10, to enhance their ability to identify and address potential threats.
How should skills and talent be evaluated to ensure they are rightsized to support growth?
The product manager must actively monitor competitors and the general software ecosystem for new ideas. Additionally, the team should maintain a good balance of testing and active development. Maintenance and customer service demands also must not overwhelm DevOps time. Sprints should be quick, adequately scored and achieved without resource conflicts arising from parallel efforts. Confirm that sales engineers are integrated into the development team and involved in the road map process. Additionally, reviewing the development team’s skills, velocity and technical management capabilities is crucial to ensure they can effectively align with business needs.
What are some questions RSM will ask during the software due diligence process?
Key questions include:
- How do you assess the total cost of customer acquisition, and what amount of time and level of involvement must developers commit to sales engineering, onboarding and customer support functions?
- Given your revenue objectives and road map, how will the development team need to expand over the next six, 12 and 18 months to support those goals?
- How do you manage talent versus costs through mindful nearshoring and offshoring strategies?
How are the robustness and scalability of a software product assessed?
We examine the technical debt and remediation processing in place to help ensure that issues are promptly identified and addressed. The development team’s velocity in creating new features and functionality versus fixing bugs is also evaluated. Additionally, load testing and throughput metrics are analyzed to determine the software’s performance under various conditions and its capacity to handle increased demand.
