Due Diligence Checklist for the Technology, Media, and Telecommunications (TMT) Sector

Conducting thorough due diligence is essential in the fast-paced TMT sector, where intellectual property, digital security, and evolving market demands play a crucial role. This checklist provides a guide to help ensure informed decision-making in acquisitions or investments.

Legal and Regulatory Due Diligence

• Verify intellectual property (IP) ownership, including patents, trademarks, copyrights, and trade secrets.

• Assess compliance with industry-specific regulations (e.g., FCC for telecom, GDPR for data privacy).

• Review licensing agreements for software, content, and technology usage.

• Examine contracts with technology partners and critical vendors.

• Investigate ongoing or past litigation related to IP disputes or regulatory violations.

Financial Due Diligence

• Analyze revenue streams, including subscription models, advertising, and licensing fees.

• Analyze the stability and predictability of revenue by evaluating key factors such as revenue retention, churn and trends within each customer and product/service line over time

• Assess customer concentration and, if applicable, the contract terms and status of larger customers

• Assess free cash flow, including capital expenditure on technology infrastructure and net working capital requirements

• Evaluate financial risks related to rapid technological obsolescence.

• Examine tax compliance, especially for cross-border digital services.

Operational Due Diligence

• Assess scalability and reliability of technology infrastructure (e.g., cloud services, telecom networks).

• Review cybersecurity measures and data protection protocols.

• Evaluate supply chain dependencies for hardware and software components.

• Analyze operational workflows for content creation, distribution, and monetization.

• Examine disaster recovery and business continuity plans for digital operations.

Commercial Due Diligence

• Conduct market analysis, including growth potential and risk of disruption from emerging technologies

• Assess competitive positioning in the relevant sub-sector of the TMT landscape.

• Evaluate customer acquisition and retention strategies and opportunities to cross-sell or up-sell additional products and services

• Analyze growth opportunities such as geographic expansion, product/service additions and the potential to leverage new sales channels

• Review partnerships with content creators, advertisers, and technology providers.

Human Resources Due Diligence

• Review contracts for key talent, including engineers, developers, and content creators.

• Assess employee retention strategies in a competitive tech talent market.

• Evaluate workforce readiness for adopting new technologies and workflows.

• Review compliance with labor laws in multiple jurisdictions.

Real Estate and Asset Due Diligence

• Assess data center locations and their compliance with local regulations.

• Review leases for office spaces and production facilities.

• Evaluate environmental impact and sustainability of technology infrastructure.

• Examine physical assets, if applicable

IT and Digital Security Due Diligence

• Inventory IT systems, software, and digital platforms.

• Assess cybersecurity measures, including protection against data breaches and ransomware.

• Review compliance with data privacy laws (e.g., GDPR, CCPA).

• Evaluate integration capabilities for mergers or acquisitions.

• Examine software development lifecycle and quality assurance processes.

Summary

The Technology, Media, and Telecommunications (TMT) sector presents unique opportunities and challenges during the due diligence process. A thorough review across legal, financial, operational, commercial, HR, real estate, and IT areas ensures a comprehensive understanding of risks and opportunities. With its extensive experience in acquisitions, CairnPeak is here to guide you every step of the way, providing unparalleled expertise to help you make informed decisions and achieve your business objectives.

Ready to take the next step in your M&A journey? Contact CairnPeak Advisors today for a complimentary consultation and discover how we can help you achieve a successful sale and seamless transition.