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Technical due diligence is part of the so-called due diligence. Due diligence refers to a technical assessment of the condition of a property. In technical due diligence, the technical side of a potential purchase object is closely examined and investigated. This term describes the detailed investigation of a potential purchase, or investment object in all areas. As a rule, it is an analysis of the strengths and weaknesses of the object.
To get the best out of technical due diligence, investors can apply best practices to enable an objective assessment of the investment objective. Insufficient due diligence may cause the investor to overlook critical factors that may be regretted after an investment decision is made. Therefore the following are the three components of a technical due diligence:
1. Prepare tailor-made technical due diligence checklist
The technical due diligence checklist is carried out by investors from many industries. In the IT industry, for example, a technical due diligence checklist is performed to evaluate factors such as scalability, code quality and security of the product. In the real estate industry, on the other hand, the process is used to assess the technical and physical feasibility of a commercial property. Adapting the technical due diligence checklist to specific circumstances helps investors to develop a tailored list of questions and requirements to help them make an acceptable investment decision.
2. Prepare investment target according to your own expectations
It is more productive for all parties involved in the representative of the investment target is allowed to prepare documents and other requirements in advance. This helps to avoid delays in the technical due diligence examination. The investor will then find it easier to study the company in detail.
3. Going through the technical due diligence checklist
Although the technical due diligence checklist is only a list of requirements for the investment, this does not exempt investors from carefully going through each item on the checklist. Time should be taken to interview all key stakeholders in the investment target. The checklist may include notes of the interviews and photographs of the documents submitted. If necessary, follow-up meetings should be arranged. It should be ensured that each item on the checklist is well-founded to ensure a comprehensive technical due diligence process.
If you use a comprehensive checklist for technical due diligence, you can benefit in many ways. You see all the risks transparently in front of you and can thus make safe decisions. The main benefits of technical due diligence are outlined below.
The assessment and implementation of the objectives of the final report form the basis for project closure. A checklist is helpful in the sense that it documents all the details about activities and interruptions of the project. Lumiform, the powerful app for inspections offers project managers the opportunity to avoid the hassle of disorganised documents, manual tracking of project deliverables as well as the cumbersome handover of project completion reports.