A strategic buyer approached Unicornly to undertake a tech due diligence analysis of an online restaurant reservation system. We assessed the possible costs and risks of integrating selected modules within the client’s restaurant platform.
A French-based startup running a SaaS platform for restaurants, who previously worked with Unicornly on technology consulting, approached us to perform tech Due-Diligence and business analysis. The company was looking to acquire another startup SaaS platform for online booking of restaurant tables.
The goals of the acquisition was to increase the company’s market share in France, to broaden customer base and to increase competitive advantage by integrating the platform with their current solution in order to add new features. The biggest challenge to solve was to understand whether it would be better to buy and integrate an existing solution or to build a new one from scratch.
In order to best understand the situation, the platform to be acquired was assessed with the following questions in mind: What is the overall quality and maturity of the platform? Are there any technological limitations related to integrating its features with the platform of the acquiring startup? What are the pros and cons of buying the platform and integrating its features versus building these features from scratch?
Finding answers to the questions above took Unicornly’s team a week. The work involved a lead consultant with relevant business background and a tech consultant with appropriate IT experience. Due to COVID restrictions, the work was performed remotely, which didn’t affect its effectiveness.
The first step of the Due-Diligence was a kick-off workshop with stakeholders to get clarity over the business context and properly understand the objectives of this acquisition. Secondly, the team arranged a call with the company that owned the assessed platform in order to explain the goals of the process, walk through requested documentation and to set deadlines for delivering it.
When all requested necessary documentation was securely shared with Unicornly’s team, another workshop took place to further clarify the assessment. Then, the team performed remote source code and cloud walkthroughs, followed by some automatic analysis. Gathering required information allowed the consultants to smoothly analyse the technical aspects of the platform, with particular stress on the software architecture, codebase, infrastructure and security.
On the technical side, we analysed the platform – among others – from the perspective of the adherence to best practices, fitness to purpose and the overall digital maturity of the solution. The findings were later verified by C-level tech experts.
On the business side, the lead consultant analyzed how the results of the tech assessment impact both the business objectives and the goals of the acquisition. The identified risks, opportunities and recommendations were synthesized into an executive summary, that after a verification by a founder-level expert formed core input to the Tech Due Diligence report.
The report stated that the overall digital maturity of the assessed platform is comparable with an average solution at this level of development. However, it has its disadvantages, with the weakest point of the system being its codebase and security.
On the one hand, the software architecture of the assessed system was well-designed and fully compliant with industry best practices. It uses a modern technology stack based on React and Django, the popular Python framework. The platform can be easily transferred to a different cloud provider, imposing no vendor lock.
Moreover, the infrastructure of the system was also well-built. It is hosted on AWS, one of the most popular public clouds, and uses load balancers, auto scaling, separate cache systems, content delivery network, database replication, dockerized environments and microservices. Implementation of CI/CD would automate deployments and reduce the risk of human error, but in this case that would be a nice-to-have rather than a must.
On the other hand, even though the source code was hosted on GitLab and used popular Object-Relational Mapping, the codebase quality was definitely way below the market average. The most significant challenge was related to the inconsistent API with an invalid structure and no API documentation in place at all.
Furthermore, the security level of the system was below market average too. The time to restore data and the entire system, which was short, definitely negatively impacted the scoring. Nevertheless, the most critical issue was related to the fact that credentials of the platform users were stored in source code as open text, which may result in serious data leaks.
As a result of this Tech Due-Diligence, in one week the team delivered a summary report in the form of a pdf presentation. The report was then presented to the customer, followed by a Q&A session to further clarify any arising questions.
The report included Unicornly’s recommendation not to acquire and integrate the platform with the system of the customer. The main reason for it was the fact that the estimated costs of such an implementation were similar to the costs of building the same features from scratch, avoiding the mistakes identified during the assessment.
Such an integration would also significantly increase the costs of infrastructure and drag out the maintenance time. Not to mention the risks associated with acquiring low quality source code, lacking unit tests and with incomplete or without documentation, which would also lead to issues impacting stability and could possibly prevent adding new features in the future.
The technical part of the report recommended not to take the solution over, but the business part took into consideration the significant value of the customer base of the platform, which could not be omitted in this context. That is why Unicornly recommended to acquire, if possible, the customer base of the platform and their top talent, but to build its features from scratch instead of buying an existing solution.
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