Pre-deal due diligence

The target’s internal technology and infrastructure should be reviewed alongside its associated potential risks, above and beyond information purely available on the number of subscribers, subscription products and the duration of the subscriptions.

Using technology to report and communicate transparently and clearly to both customers and investors or buyers pre- and post- transaction is essential to facilitate a smooth transaction and minimise risk.

However, automating communications and payments by using technology can also create risk. For instance, any pre-transaction errors in communications or payments (such as a missed communication or an under- or over-payment from customers) could have a ripple effect across multiple subscribers that should be explored in diligence and resolved pre-transaction.

Plugged in

The subscription model has to be ‘plugged in’ to every part of the business, from sales and marketing through customer service to IT and finance.

As well as needing effective alignment through change management, this is likely to require technology migration and integration. Businesses will aim to understand the scope of this through pre-deal due diligence, but may still wish to seek appropriate representations or warranties concerning, for example, the performance or compatibility of systems.

It is also vital to establish that the crucial intellectual property behind the technology is being acquired or appropriately licenced (taking into account any likely developments and future expansion). In some subscription models, the key IP may even have multiple owners.