Software Technical Due Diligence Costs Explained

A full due diligence review combines automated and manual inspection, covering source code quality, architecture design, infrastructure resilience, cybersecurity posture, and third-party software dependencies. It also evaluates team performance, documentation, and release management. A deeper review is warranted when technology is the core value driver of the business or when prior development has involved multiple teams or legacy systems. In smaller organisations, the focus may be on maintainability and technical debt, whereas enterprise-level reviews examine scalability, resilience, and compliance with engineering and data-protection standards.

In the United Kingdom, a typical software technical due diligence engagement costs between £20,000 and £100,000, although large-scale audits for enterprise systems can exceed £150,000. The total fee depends on factors such as:

• Codebase volume: measured by repository size and number of active components.
• Technology diversity: multiple frameworks, languages, or environments increase analysis time.
• Depth of reporting: whether the output is a high-level summary or a detailed remediation plan.
• Risk profile: regulated sectors, such as fintech or health, require more extensive compliance reviews.

Deal Size (GBP)	Typical Technical Due Diligence Cost	Estimated Duration
Under £1 million	£10,000–£25,000	2–3 weeks
£1 million–£10 million	£25,000–£60,000	3–5 weeks
Over £10 million	£60,000–£150,000+	4–8 weeks

For context, a mid-sized acquisition of around £6 million might incur approximately £40,000 in technical due diligence costs, covering code-quality analysis, DevOps inspection, licensing validation, and interviews with key engineers. While these figures vary by engagement, they remain proportionally small compared with the potential cost of post-acquisition remediation when hidden risks emerge later.

The return on investment for a robust due diligence process is often substantial. It prevents unforeseen technical debt, clarifies development velocity, and strengthens negotiating leverage. In short, it provides the insight needed to invest with confidence.

Related Read: How Much does Software Development Cost?, Technical Due Dilligence Services

TL;DR: Key Takeaway Points

Software technical due diligence provides investors, CTOs, and executives with an evidence-based understanding of technical risk, enabling smarter valuations and smoother integrations.

• Software technical due diligence (TDD) assesses a company’s software, infrastructure, and development practices to confirm quality, security, and scalability before acquisition or investment.
• In the UK, TDD costs typically range from £20,000 to £150,000, usually less than 1% of total deal value, yet it can prevent costly surprises such as technical debt, licensing breaches, or cybersecurity weaknesses.
• A structured review covers code quality, architecture, infrastructure, team capability, and processes, producing an actionable report with risk ratings, remediation costs, and integration guidance.
• Software Development UK (SDUK) are recognised UK experts in software technical due diligence, helping investors and CTOs make informed, confident decisions through clear, data-driven assessments.

What Are the Four P’s of Due Diligence?

The four P’s of due diligence; People, Product, Process, and Performance represent the core dimensions used to assess the strength and sustainability of a technology business. Together, they form a structured framework that ensures both the human and technical aspects of a company are evaluated fairly and objectively during an acquisition or investment.

While financial and legal audits focus on compliance and valuation, the four P’s provide insight into how a technology company actually operates and scales. When applied to software technical due diligence, each “P” helps investors understand a different layer of operational maturity and future cost exposure.

Breakdown of the Four P’s

Pillar	Focus	Key Questions During Assessment
People	Skills, experience, and stability of the engineering and management teams.	Are there key-person dependencies? Is knowledge shared effectively? How is technical leadership structured?
Product	Quality, architecture, and scalability of the software itself.	Is the product technically sound? Can it evolve quickly without high maintenance costs? Does it align with market demand?
Process	Development methodologies and governance that control quality, delivery, and risk.	Are Agile, DevOps, and testing practices consistent and measurable? Are release cycles well managed?
Performance	Reliability, resilience, and operational efficiency of the platform.	Does the system scale predictably? Are uptime and load metrics tracked? Is there evidence of optimisation over time?

Each pillar exposes a different form of technical risk:

• Weak People can mean high turnover or dependence on key developers.
• An unstable Product can drive post-acquisition remediation costs.
• Inefficient Processes can slow releases or inflate budgets.
• Poor Performance can limit growth and affect customer trust.

By combining these assessments, investors gain a holistic view of the target company’s operational health. For example, a strong engineering team (People) may compensate for short-term product limitations, while solid processes can mitigate scaling challenges. Conversely, weaknesses across multiple pillars often signal deep-rooted technical or cultural issues that require early intervention.

In practice, the four P’s framework is used to structure due diligence reports, scoring each dimension to highlight areas of strength and concern. This clarity supports better valuation, more informed negotiation, and smoother post-merger integration planning.

What Are the Three Types of Due Diligence?

The three primary types of due diligence are financial, legal, and technical, each focusing on a different aspect of a company’s overall health and value. Together, they form the foundation of any well-structured merger, acquisition, or investment review. While financial and legal due diligence verify compliance and fiscal integrity, technical due diligence examines the actual technology that drives the business;  often the deciding factor in modern software-led deals.

Overview of the Three Types

Type	Purpose	Typical Scope	Primary Stakeholders
Financial Due Diligence	Validates the accuracy of financial statements and forecasts.	Revenue streams, profitability, debt exposure, and cash flow sustainability.	CFO, accountants, and financial analysts.
Legal Due Diligence	Confirms ownership, compliance, and regulatory standing.	Contracts, intellectual property rights, data protection, employment law, and outstanding litigation.	Legal counsel and compliance officers.
Technical Due Diligence	Assesses technology assets, software quality, and operational maturity.	Code review, cybersecurity, infrastructure, scalability, and process integrity.	CTOs, software engineers, and technology consultants.

Although all three are interdependent, technical due diligence has become increasingly significant in software acquisitions and venture capital investments. In the UK’s technology sector, more than 70% of M&A transactions now include a structured technical audit as part of the deal process. This reflects the growing understanding that most business value today lies in intellectual property and digital systems rather than physical assets.

In practical terms, technical due diligence connects directly with the other two disciplines:

• Findings from the technical review can influence financial valuations, especially where remediation costs are expected.
• Discoveries about licensing or data protection can trigger legal follow-ups.

For example, a buyer evaluating a SaaS platform might uncover that 20% of its code depends on unlicensed open-source components. That would immediately affect both legal compliance and financial projections for remediation. Similarly, legacy infrastructure or high hosting costs discovered during the technical audit can impact valuation and operating margins.

An integrated due diligence process therefore allows for a balanced understanding of risk. Financial health without technical strength may lead to short-lived success, while perfect legal compliance cannot offset a fragile, unscalable product. Only by combining all three lenses can investors see the complete picture of opportunity versus risk.

How Much Does a Technical Due Diligence Report Cost?

The cost of a technical due diligence report typically ranges between £20,000 and £150,000 in the United Kingdom, depending on the size, complexity, and risk profile of the target software system. Smaller codebases or early-stage products may require a short, high-level review, while enterprise platforms with complex architectures demand in-depth analysis across multiple domains such as infrastructure, security, DevOps, and licensing.

The total cost is influenced by four main factors:

1. Scope and depth of review – A simple code audit may take one to two weeks, whereas a full technical and operational assessment can last four to eight weeks.
2. System complexity – Multiple repositories, microservices, or mixed technology stacks increase effort and analysis time.
3. Regulatory requirements – Regulated industries such as finance or healthcare often require extended compliance verification and data protection reviews.
4. Deliverable expectations – Reports that include detailed remediation roadmaps, cost modelling, and investor presentations require more analyst hours.

A typical breakdown of cost versus project size is illustrated below:

Deal Size (GBP)	Technical Due Diligence Cost	Duration	Example Scope
Under £1 million	£10,000–£25,000	1–3 weeks	Code quality, security posture, basic infrastructure review.
£1 million–£10 million	£25,000–£60,000	3–5 weeks	Full architecture, DevOps, and process analysis.
Over £10 million	£60,000–£150,000+	4–8 weeks	End-to-end audit covering security, scalability, licensing, and team maturity.

In practice, technical due diligence costs are often proportional to deal value. On average, they account for around 1% of total transaction value, a small fraction compared with the potential losses that can arise from unidentified technical debt, insecure code, or underperforming teams.

It is also common for investors or acquirers to commission follow-up audits after completion, especially if critical issues were discovered during the initial review. These post-transaction checks ensure remediation has been completed and confirm that future releases align with promised standards.

Although the upfront cost may appear significant, well-executed technical due diligence often pays for itself many times over. It provides investors with the clarity to negotiate fair valuations, plan realistic integration budgets, and avoid post-deal surprises that can cost hundreds of thousands to correct.

---

What Are Diligence Charges and Standard Fees?

Diligence charges refer to the professional fees incurred when conducting due diligence during an acquisition, merger, or investment process. These charges cover the cost of specialists such as accountants, legal advisors, and technical consultants who perform structured assessments to verify the target company’s financial, legal, and technical integrity.

In the UK, diligence fees are typically borne by the buyer or investor, although in competitive transactions both sides may commission independent reviews. These fees are usually structured as either fixed-price engagements for well-defined scopes or time-and-materials (T&M) arrangements for complex or evolving reviews.

Typical Fee Structures

Service Type	Common Fee Model	Average Cost Range (GBP)	When Used
Technical Due Diligence	Fixed price or capped T&M	£20,000–£150,000	Software and technology-driven acquisitions.
Financial Due Diligence	Fixed price or daily rate	£25,000–£200,000	Verification of financial statements and forecasts.
Legal Due Diligence	Hourly or retainer-based	£30,000–£250,000+	IP, contracts, regulatory, and compliance checks.

Professional service firms sometimes charge retainer fees to secure resources ahead of deal execution, which are later deducted from final invoices. These retainers usually range from 10% to 20% of the estimated total cost.

Larger advisory firms, such as the Big Four, generally have higher fee rates, reflecting both their scale and the perceived reliability of their reports. Boutique consultancies and specialist firms often offer more flexible pricing models and can provide deeper insights in niche technical domains like software engineering, cybersecurity, or open-source compliance.

In multi-disciplinary transactions, diligence charges can also include integration-readiness assessments and post-acquisition audits. These additional reviews evaluate how well the acquired company can merge with the buyer’s operations, helping to reduce disruption after completion.

When budgeting, buyers typically allocate 1% to 3% of total deal value to cover all forms of due diligence. The actual percentage varies depending on the deal’s complexity, sector, and regulatory oversight. For highly technical or cross-border transactions, the diligence portion of total transaction costs can be slightly higher due to legal and compliance overheads.

Ultimately, diligence fees should be viewed as an investment in transparency. The insights gained often have a direct impact on valuation, negotiation leverage, and the buyer’s confidence to proceed. Well-scoped diligence not only reduces the risk of overpaying but can also uncover opportunities for optimisation and post-deal improvement.

Why Do Software Technical Due Diligence Costs Vary So Widely?

Software technical due diligence (TDD) costs vary widely because every technology business is different in scale, complexity, and maturity. The size of the codebase, diversity of technology stacks, and level of automation all influence the time and expertise required. A single-repository web application may take one engineer a week to review, while a multi-service platform using several programming languages, APIs, and cloud environments could take a full team more than a month.

The scope of the review also plays a major role. Some buyers require a baseline code audit, focusing only on quality and maintainability. Others request a deep forensic assessment covering everything from DevOps pipelines to third-party dependency tracking, cybersecurity posture, and scalability under load. In short, the more critical software is to the deal’s value, the deeper and more expensive the review becomes.

Key Factors That Drive Cost Variability

Factor	Description	Impact on Cost
Codebase Size & Complexity	Large, multi-language repositories or legacy monoliths take longer to assess.	High – each additional system increases analysis time and reporting.
Security & Compliance Requirements	Reviews in regulated industries (e.g., finance, healthcare) require more in-depth testing.	High – cybersecurity and compliance specialists raise cost but reduce post-deal risk.
Technology Diversity	Different stacks (e.g., React, Python, .NET, Java) require a broader expert team.	Moderate to high – more specialists mean more hours.
Documentation Quality	Clear documentation accelerates analysis, while missing information extends the engagement.	Moderate – poor documentation can increase effort by 20–40%.
Team Cooperation	Access to developers and infrastructure staff speeds up review cycles.	Moderate – uncooperative teams prolong discovery and validation.
Deliverable Type	High-level summary vs. detailed remediation plan and cost model.	Moderate to high – more detailed deliverables require greater effort.

Industry research shows that while most UK technical due diligence projects fall between £20,000 and £100,000, the total cost can increase significantly for large enterprise acquisitions or time-sensitive deals requiring accelerated turnaround. Conversely, a smaller start-up review might cost under £15,000 if limited to a snapshot of code quality and security.

Another major contributor to variation is the risk tolerance of the buyer. Private equity investors acquiring mission-critical software platforms typically commission exhaustive reviews that include penetration testing, architecture modelling, and team-capability assessments. Corporate buyers acquiring smaller bolt-on technologies may prefer a streamlined, high-level review focused on integration potential rather than deep technical debt analysis.

Ultimately, the most accurate predictor of cost is scope definition. Early alignment between the buyer and the due diligence provider ensures that resources are allocated efficiently. Under-scoping to save cost often leads to overlooked risks, whereas over-scoping can duplicate effort or delay decision-making. The most effective engagements balance precision with practicality: detailed enough to identify material risks, but efficient enough to preserve deal momentum.

What Are Common Red Flags Found During Due Diligence?

Common red flags uncovered during software technical due diligence include security vulnerabilities, poor code quality, weak development practices, and unresolved licensing risks. Each of these can significantly affect valuation, post-acquisition cost, and the long-term sustainability of the software. Identifying them early enables buyers to renegotiate terms, request remediation, or even withdraw from high-risk deals.

The majority of software-related risks fall into several recurring categories. Experienced auditors often recognise these patterns within the first week of analysis, as they tend to signal deeper organisational or technical weaknesses.

Common Red Flags and Their Implications

Category	Typical Issue Identified	Potential Impact
Security Vulnerabilities	Outdated dependencies, unpatched CVEs, hard-coded credentials, weak access controls.	Data breaches, GDPR non-compliance, or reputational damage.
Licensing & IP Risks	Use of unlicensed third-party code or GPL-contaminated libraries.	Legal disputes, forced code rewrites, or product withdrawal.
Code Quality & Maintainability	High technical debt, lack of modularity, and inconsistent coding standards.	Increased development costs and reduced agility post-acquisition.
Architecture & Scalability	Monolithic design or lack of redundancy.	Limits growth, reduces resilience, and increases infrastructure cost.
DevOps & Process Gaps	No CI/CD pipelines, poor release management, or missing QA automation.	Frequent downtime, deployment failures, and delivery bottlenecks.
Documentation & Knowledge Transfer	Incomplete system documentation or key-person dependency.	Slows onboarding, increases reliance on specific individuals.
Team Capability Issues	Skill gaps, high turnover, or dependency on contractors.	Reduces operational stability and delays product evolution.

One of the most serious findings during due diligence is licensing contamination, particularly involving open-source software under restrictive licences such as GPL. If incorporated incorrectly, these components can require the acquiring company to release proprietary code publicly or pay for re-engineering; a risk that can materially change the deal’s value.

Similarly, weak security posture is a consistent red flag. The UK’s National Cyber Security Centre (NCSC) highlights vulnerabilities in outdated frameworks and dependency chains as major contributors to software-related breaches. In the context of due diligence, such issues are not just technical; they represent potential compliance violations and financial liabilities.

Poor documentation and weak DevOps practices also appear frequently, especially in fast-growing start-ups that have prioritised speed over structure. These gaps can lead to delays in scaling, onboarding, and integration after acquisition.

An experienced due diligence team will prioritise red flags based on risk severity and remediation effort, producing a risk matrix to guide negotiation and post-acquisition planning. Identifying a handful of major risks does not necessarily end a deal; but failing to uncover them can turn a good investment into a costly recovery project.

How Do You Prepare for a Technical Due Diligence Review?

Preparing for a software technical due diligence review involves organising your documentation, validating your systems, and ensuring your team can provide clear, verifiable information about the company’s technology. Proper preparation not only reduces the time and cost of the review but also leaves a strong impression of operational maturity and transparency; factors that can positively influence valuation.

A well-prepared company should approach due diligence as a collaborative audit, not a defensive exercise. The goal is to make it easy for assessors to understand how the business is run and where its technical strengths lie. The most efficient way to do this is to anticipate the reviewer’s key questions in advance.

Key Preparation Steps

Area	Preparation Task	Why It Matters
Codebase	Ensure repositories are structured, access is secure, and all branches are documented.	Enables smooth code inspection and minimises confusion during review.
Documentation	Update architecture diagrams, API references, and deployment manuals.	Clear documentation speeds up verification and signals engineering discipline.
Security & Compliance	Run internal vulnerability scans, patch critical issues, and review data-handling procedures.	Reduces exposure during the audit and builds investor confidence.
Licensing	Maintain an up-to-date open-source software inventory and licence report.	Prevents discovery of non-compliance that could affect deal terms.
Infrastructure	Provide a summary of cloud architecture, costs, scaling plans, and disaster recovery processes.	Demonstrates operational readiness and cost transparency.
Processes & Procedures	Document CI/CD pipelines, testing coverage, and release frequency.	Illustrates team efficiency and reduces uncertainty around delivery capacity.
Team & Roles	Prepare an organisational chart, outlining key staff and responsibilities.	Assures continuity and reveals how knowledge is distributed across the team.

Practical Preparation Tips

1. Create a data room. A secure, well-structured digital workspace (e.g., SharePoint or Google Workspace) helps reviewers access files efficiently.
2. Perform a pre-assessment. Conduct an internal audit to catch obvious issues before the formal review begins.
3. Nominate a point of contact. A technical lead should coordinate requests, track progress, and ensure consistent communication.
4. Clarify ownership and dependencies. Ensure contracts, licences, and third-party service agreements are readily available.
5. Prepare for interviews. Reviewers may want to speak with engineers, DevOps leads, or product managers; brief your team to answer confidently and honestly.

Companies that invest time in preparation often shorten the overall review period by 25–40%, according to industry benchmarks from major UK M&A advisors. This efficiency can translate directly into reduced fees and a smoother negotiation process. Moreover, a transparent, well-organised presentation of technical evidence signals to investors that the company operates with discipline and foresight; qualities that can positively influence deal outcomes.

Why Is Technical Due Diligence Critical for Investors and CTOs?

Technical due diligence is critical because it provides investors and CTOs with evidence-based assurance that the software, systems, and teams behind a business can sustain growth, scale efficiently, and withstand future risks. In modern acquisitions, where software often represents the majority of enterprise value, understanding its true condition is essential to making sound investment decisions and safeguarding long-term returns.

For investors, the process validates whether the technology aligns with commercial promises made by the seller. It exposes unseen liabilities such as excessive technical debt, cybersecurity weaknesses, or unrealistic development timelines. Without this insight, investors risk overpaying or inheriting systems that are costly to maintain and slow to modernise.

For CTOs; whether on the buy or sell side; technical due diligence offers a different kind of value. It provides a structured framework to benchmark engineering quality, identify gaps in capability, and plan future improvements. For sellers, it also serves as a readiness exercise, helping to surface issues before potential buyers discover them.

How Technical Due Diligence Protects Value

Stakeholder	Benefit	Example Scenario
Investor / Buyer	Verifies that software assets support the business plan and can scale post-acquisition.	A venture fund acquires a SaaS firm and avoids £300,000 of unexpected refactoring work by uncovering legacy dependencies early.
Seller / CTO	Strengthens credibility and prepares defensible answers to technical queries.	A CTO pre-audits their platform, resolving security vulnerabilities before a buyer’s inspection.
Board / Executives	Provides transparency on operational risk and resource requirements.	Directors receive a clear breakdown of remediation costs to plan post-merger integration budgets.
Engineering Team	Gains clarity on priorities and long-term investment areas.	Engineers use due diligence findings to justify process automation and cloud cost optimisation.

A comprehensive technical due diligence report also supports strategic decision-making. Findings from the audit can feed directly into valuation models, contract negotiations, or integration planning. For example, quantifying the cost to address technical debt or migrate legacy systems allows investors to make informed trade-offs between purchase price and remediation funding.

In addition, due diligence provides assurance around security posture and compliance; areas of growing importance under regulations such as the UK GDPR and the National Cyber Security Centre’s Cyber Assessment Framework. For investors in critical sectors such as finance, defence, or healthcare, these checks are non-negotiable.

Ultimately, technical due diligence is not just about identifying risks; it is about protecting value. It equips both investors and technology leaders with the information needed to make confident, data-driven decisions that balance innovation with stability.

Can You Afford Not to Do Software Technical Due Diligence?

Software technical due diligence is no longer a luxury; it is a necessity for anyone investing in, acquiring, or selling technology-driven businesses. It provides a clear and measurable view of the technical foundations that underpin enterprise value, helping decision-makers identify strengths, quantify weaknesses, and negotiate with confidence.

The insights gained from a thorough review can prevent costly surprises. Undiscovered security vulnerabilities, unlicensed dependencies, or poor architectural design can transform a promising acquisition into a financial liability. By contrast, organisations that commission detailed, evidence-based due diligence are able to plan ahead, quantify risk, and strengthen integration outcomes.

In the UK, technical due diligence typically represents less than 1% of total deal value, yet it can save tens or even hundreds of thousands of pounds in remediation and lost opportunity costs. A robust process gives investors clarity, protects value, and empowers technology leaders to demonstrate control and maturity across their systems and teams.

A comprehensive due diligence engagement should provide:

• A complete view of the codebase, architecture, and infrastructure.
• A breakdown of technical debt and remediation priorities.
• An evaluation of security posture, compliance readiness, and scalability.
• A set of actionable recommendations for integration and post-acquisition improvement.

At Software Development UK (SDUK), our consultants have extensive experience conducting software technical due diligence for investors, private equity firms, and technology companies across the UK and Europe. We combine engineering expertise with business insight to deliver clear, factual assessments that support confident decision-making.

If your organisation is preparing for an acquisition, planning an investment, or simply wants to understand the risks within its current technology stack, we can help. Our UK-based due diligence team provides tailored audits, from code quality and architecture reviews to full lifecycle technical assessments.

To discuss how SDUK can support your next transaction or technology evaluation, contact us today for a confidential consultation.

Further Reading:

For those seeking a deeper understanding of software technical due diligence and its role in technology-led mergers, acquisitions, and investment assessments, the following books provide detailed and practical perspectives. They range from technical evaluation frameworks to strategic and financial insights relevant to investors, CTOs, and advisory professionals.

Recommended Books

1. Technology Due Diligence: Best Practices for Chief Information Officers, Venture Capitalists and Buy-Side Acquisition Teams
   By Igor Svab and Helmut Krcmar
   A comprehensive guide exploring the structure, process, and evaluation criteria for technology due diligence. It focuses on aligning technical assessments with business strategy, and provides checklists for CIOs, investors, and advisory teams.
2. Mergers and Acquisitions in the Software Industry
   By Michael B. Stadtfeld
   Examines M&A activity specific to the software sector, including valuation models, integration challenges, and the importance of technical validation. Useful for understanding how technology assets influence deal structure and price.
3. IT Due Diligence: Merger & Acquisition Discovery Process
   By Mike Sisco
   A practitioner’s handbook outlining step-by-step IT due diligence techniques. It covers risk identification, documentation, and the discovery process, making it particularly helpful for technical teams supporting investors.
4. Buy Then Build: How Acquisition Entrepreneurs Outsmart the Startup Game
   By Walker Deibel
   Although broader in focus, this book provides valuable context on acquisition strategy and how operational diligence, including technology review, forms part of value creation for modern entrepreneurs and private equity investors.