Software/technical due diligence in a small business acquisition

May 29, 2026

by a searcher from The University of Michigan - Stephen M. Ross School of Business in New York, NY, USA

I’m currently evaluating a small industrial equipment manufacturer. It’s not a SaaS business but does have proprietary software embedded in its equipment, and the CIM claims the software is a meaningful competitive advantage vs other equipment in the market. Since I’m not a programmer, I’m considering hiring a third party to do a focused software diligence review to better understand what I am acquiring, what know how needs to transfer post-close and whether a go-forward team could maintain it. For anyone who has done this in a small business transaction: 1. Why did you decide to use a third party? 2. What scope did you ask them to cover? 3. What did it cost? 4. Was it worth it? 5. Are there any firms or individuals you’d recommend for this type of review, especially for embedded software/industrial controls (rather than SaaS)? 6. Any lessons learned? Thanks!

Reply by a searcher
from University of California, Riverside in Raleigh, NC, USA

On whether to hire a third party, yes, always, when software is claimed as a competitive advantage. The risk is commercial. If the software advantage is real, you need to understand how defensible it is. If it is not real, you are paying a premium for something that does not exist. A third party removes the seller's framing from the equation. For a focused embedded software review on a small manufacturer you should expect $8K–$20K for a credible scope covering architecture review, dependency mapping, documentation assessment, and knowledge transfer risk. If someone quotes you less than $5K for anything meaningful they are not going deep enough.

Reply by a searcher
from Hamilton College in New York, NY, USA

I do diligence projects like these on occasion, and usually "proprietary" doesn't actually mean "competitive advantage" on scrutiny. Great for building a story on "why us". Usually, proprietary means "more cost", though it's getting less expensive with genAI/LLMs. Currently OOO until mid-June, but hit me up if you still need help around then.

+3 more replies.

Join the discussion