Due Diligence Services

AI is rapidly transforming every industry, and software is at the center of that shift. From automating workflows using agentic solutions to scaling products using generative capabilities, AI is accelerating operational efficiency, product innovation, and competitive differentiation while evolving in real-time.

While AI creates significant upside, it also disrupts traditional businesses across all sectors. Private Equity investors must assess not only how a target company uses AI today but also its readiness to react to AI-driven disruption to protect its business and capture growth opportunities.

EY-Parthenon’s Software Strategy Group provides AI due diligence services for Private Equity firms, corporate clients, and software companies that consider the commercial, technical, and financial implications of a target’s use of AI capabilities:

• AI in the market: Assess the impact of AI-driven market opportunities, growth vectors, disruption risks, and competitive moats – synthesizing market signals, technical experience, and voice of the customer
• AI in product: Evaluate the maturity of a target’s use of AI in its products and technology including AI/ML model readiness, AI techniques, data sources, data pipelines, and data science teams
• AI in R&D: Determine the target’s use of AI-enabled tools within its Software Development Lifecycle to accelerate product development and increase the ROI of R&D spend
• AI in operations: Understand the level of AI adoption in the business across customer-facing operations and back-office functions to evaluate cost efficiency opportunities

EY-Parthenon has established a dedicated AI Center of Excellence (CoE) that advises clients on transformative AI solutions and investments across markets, product, technology, and operations. This team includes senior leaders with hands-on AI experience, including an ex-CTO at the forefront of real-world AI use cases such as computer vision, GenAI, and NLP. We have advised clients on 50+ AI-focused engagements over the last two years – ranging from AI diligence, AI-driven product strategy, and AI-enabled cost takeout assessments.

Through partnerships with the global EY organization’s global network of hands-on AI solution engineers, data scientists, and vertical-specific AI professionals, our assessments go beyond traditional diligence to provide deeper execution and implementation tailored to our clients’ needs.

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Given today’s threat landscape and increasing regulatory requirements, conducting cyber diligence is critical for buyers to understand the risk they are taking on.  According to one business journalistic publication, 65 percent of buyers expressed remorse over unexpected risk and expense related to cybersecurity.  Proper cyber due diligence will be able to ascertain the target company’s:

• Ability to detect a compromise
• Compliance with privacy and security regulatory requirements
• Implementation of controls needed to reduce risk to an acceptable level
• Level of cyber insurance coverage
• Level of investment needed to reduce risk and achieve compliance and
• Level of effort required to integrate with the parent company, or exit TSAs, if applicable. 

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• How will changes to peoples’ roles, responsibilities, and hierarchies inform the overall organisation’s design?
• How will compensation and benefits programs that align to the future state vision be designed, implemented and rolled out to employees?
  
• What targeted actions must we take to align leaders, the business, and employees to create a seamless onboarding experience?

• How do we plan and prepare for Day One to minimise business disruption and enable IT connectivity between buyer and acquired company?
• How can we leverage the merger as a catalyst for IT transformation?
• How can we assess existing IT capabilities for access to new markets and operational improvements?

Operational Due Diligence (ODD) plays a critical role in most transactions for both buyers and sellers, going beyond financial analysis to uncover the underlying capabilities, risks, and operating value drivers of a target company. It provides a comprehensive view of the operational backbone of the business, highlighting areas where deal value may be at risk and identifying opportunities for value creation.

Aligned with the deal thesis, ODD typically evaluates the company’s operating model, cost structure, and functional foundations necessary to achieve business objectives. This assessment encompasses various areas, including the supply chain, research and development, as well as selling, general, and administrative functions. By thoroughly examining these aspects, the parties can gain a clearer understanding of the financials, identify hidden liabilities or inefficiencies, and uncover operational levers that may either hinder or accelerate growth and profitability.

A robust ODD is hypothesis-driven and tailored to each deal, integrating both quantitative and qualitative insights to provide a fact-based perspective on risks and opportunities for decision-making. Each assessment is customized to the specific transaction, combining analytical rigor with deep operational experience, and typically focuses on three key dimensions:

• Operational transparency and risks: Assessing vulnerabilities, dependencies, and exposures that may threaten the business
• Scalability of operations: Determining whether processes, systems, and talent can support future growth and strategic ambitions, including the nature of fixed versus variable costs
• Value creation opportunities: Identifying potential areas for efficiencies and performance improvements that may be realized post-close

In today’s environment – characterized by geopolitical volatility, supply chain fragility, and rapid digital transformation – the relevance of ODD has continued to rise. Both buyers and sellers increasingly rely on it to stress-test scalability, resilience, and execution capacity, which are operational factors that can help protect and enhance deal value.

Evaluating a software-driven company requires more than commercial diligence. Product and technology due diligence provides a comprehensive view of a target’s product, technology, and R&D capabilities to unlock growth, identify risks, and uncover value creation opportunities.

EY-Parthenon’s Software Strategy Group institutionalized Product & Technology Due Diligence for private equity, becoming the leading provider for large-cap private equity over the last 10 years. We partner with top tech investors and software companies on the critical, deal-influencing questions such as:

• How does a target’s product differentiate in the market, and what is the roadmap to capture future growth?
• Can a target successfully migrate from a legacy, monolithic on-premises architecture to the cloud?
• How scalable is the product, and can the target support integration with future bolt-on acquisitions?
• How mature is a target’s R&D team, and is it investing in the right areas to execute on the roadmap?

Our specialized team of technologists and business strategists brings real-world experience to Product & Technology due diligence across a range of industries. We are led by a team of former tech executives, including a roster of ex-CTOs, that have conducted 300+ engagements in the last 12 months focused solely on software companies. These assessments leverage unique accelerators such as our world-class R&D benchmarking program that aggregates proprietary data from a quarterly survey of 2,000+ CTOs and Software CFOs.

Partnering with our software-focused commercial diligence team, we take an integrated approach that combines an evaluation of a Target’s market, competitive landscape, and growth opportunities with its ability to drive execution through its product and technology. We leverage both external and internal perspectives by interviewing industry experts, former employees, and the management team. This combination of commercial and technology experience allows us to deliver the most compelling, differentiated insights to EY clients – spanning an assessment of the target, pre-close recommendations, and long-term value creation plans.

A Product & Technology diligence typically includes the following dimensions:

• Product and roadmap: Evaluation of the product’s maturity, differentiation against competitors, and roadmap
• Technology and architecture: Assessment of the product’s architecture design, tech stacks, and technical debt
• R&D organization and process: Analysis of the R&D team’s composition, spend, geolocation, and SDLC processes
• Hosting and cloud: Determining SaaS maturity, infrastructure scalability, and hosting COGS relative to revenue and growth

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Sustainability diligence is integrated alongside either commercial or financial due diligence. We understand materiality is important and we only discuss the issues that are most relevant to a specific operating model. Then we assess maturity to understand the current state and company positioning relative to peers. We conclude with value creation recommendations that are focused on both creating positive financial and non-financial results. 

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Every deal presents opportunities—and risks. The EY Transaction Tax Advisory (TTA) team helps clients navigate the tax implications of buying, selling, investing, or restructuring so they can move forward with clarity and confidence.

• On the buy side, we evaluate the target company’s tax profile to uncover risks that may impact pricing, deal structure, or future performance. We also identify opportunities to use tax attributes such as credits and losses to maximize value and design efficient structures that support long-term investment goals.
• On the sell side, we work with businesses to position themselves for a smooth and successful exit. By addressing tax issues early, preparing for diligence and preparing reports, and exploring structuring alternatives, we help enhance transaction value, facilitate execution, and reduce potential challenges during negotiations.
• For restructuring or distressed situations, our team supports lenders and companies by assessing the tax impact of restructuring alternatives, maximizing available tax attributes, and helping optimize future profitability after the transaction.
• By collaborating closely with EY-Parthenon financial due diligence teams, we provide a connected, strategic view of every transaction. The result: informed decisions, reduced risk, and greater confidence in achieving your business objectives.

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