By Deborah Kirk

Buyout firms spent more than $39.38bn acquiring technology businesses in H1 2016, accounting for 28% of all global deal value and making technology the preferred sector for investment during the period. With investment flooding into tech, private equity is facing competition and increasingly high deal valuations. Tech companies pose unique diligence issues and failure to fully understand and price risks leaves buyout firms at risk of overpaying.

Investing in technology carries specific risks relating to the creation and ownership of intangible rights that cannot always be registered. Understanding these risks requires a combined legal and technical approach when conducting diligence. In the world of intellectual property, brand is about goodwill, recognition, avoiding dilution and ensuring registration: pharma is the world of patents and generic manoeuvring, but in the world of software, who created your code, where, and using what, are fundamental questions of value.