The Significance of Software Engineering for Private Equity Tech Portfolios

Today, technology assessments stand shoulder-to-shoulder with financial analysis in guiding management teams’ investment decisions. This evolution underscores the importance of technology as a pivotal element driving operational efficiency, competitive advantage, and market differentiation – particularly in the private equity landscape.

For private equity tech portfolios, reliable software development and consulting are not just desirable but essential. Together they create the catalyst that transforms potential into performance, investments into returns, and vision into reality.  

The Growing Need for Software Development & Technology Consulting Expertise

In PE, there’s been a marked shift towards a stronger emphasis on software product development and technology consulting. 

Software development is no longer a back-end operation; it’s a front-line competitive advantage. As companies become increasingly digitized and the market more competitive, effectively leveraging technology distinguishes winning investments from the rest. 

Technology consulting and development is where PE firms find the multiplier effect – enhancing their portfolio companies’ value, competitiveness, and resilience, paving the path for sustainable growth and lucrative exits.

The Ultimate PE Development Checklist

The Technology Investment Due Diligence Process in Seven Steps

In the due diligence process, the software aspect of a technology company is put under the microscope, ensuring investments are solid, secure, and primed for future growth.

This careful approach is crucial in identifying smart investments geared for sustained success.

1. Preparation & Planning

Goal: The objective here is to create a detailed roadmap for the due diligence process. This entails setting clear objectives, expectations, and criteria for evaluation to ensure a comprehensive and focused assessment. The foundation laid in this phase is pivotal for the accuracy and effectiveness of the entire process.


  • Identify the scope of the assessment.
  • Gather initial data and documentation.
  • Assemble a team of technical, legal, and financial experts.

The Rationale: The foundation laid in this phase is pivotal for the accuracy and effectiveness of the entire process.

2. Technical Assessment

Goal: This phase is about meticulously evaluating the target company’s technology’s quality, efficiency, and innovation. It involves examining the architecture, code, tech stacks, and the proficiency of the technical team, offering insights into the company’s technological health and capability to innovate and scale.


  • Assess the quality and scalability of software and architecture.
  • Evaluate the skillset and experience of the engineering team.
  • Review code quality, tech stacks, and development practices.

The Rationale: Understanding the technical prowess ensures that the investment is backed by solid technology, reducing the risk of future technical failures and positioning the company for scalable growth.

3. Security & Compliance Review

Goal: Here, the focus is on examining the company’s adherence to legal and industry standards and cybersecurity protocols. This involves a critical assessment of data protection, privacy measures, and the robustness of security systems to ensure the integrity and safety of data and technology assets.


  • Conduct security audits to evaluate data protection and privacy measures.
  • Check compliance with industry regulations and standards.
  • Assess preparedness for cybersecurity threats.

The Rationale: Ensuring security and compliance is key to mitigating risks associated with data breaches and legal violations, safeguarding the investment.

M&A Services

4. Financial Assessment of Tech Assets

Goal: This phase aims to quantify the financial value and assess the ROI potential of the technological assets, aligning technical robustness with financial viability.


  • Analyze technology development and maintenance costs.
  • Project the financial returns from technology innovations.
  • Evaluate the economics of potential tech upgrades or changes.

The Rationale: This ensures the tech investment is not only innovative but also aligns with the financial expectations and growth projections.

5. Opportunity & Risk Analysis

Goal: To create a balanced perspective by unveiling both technological opportunities and potential risks, enabling an informed evaluation of the investment’s potential.


  • Identify opportunities for technological improvements and innovations.
  • Evaluate potential risks and challenges, including technical debt.
  • Assess the scalability and future readiness of technology assets.

Why: It helps investors weigh the growth prospects against the associated challenges, fostering a balanced and strategic investment approach.

6. Integration Evaluation

Goal: Evaluate the integration process of the target’s technology into the existing systems or portfolio, mapping out the post-investment transition.


  • Evaluate compatibility with existing technology systems.
  • Assess the ease and cost of technology integration.
  • Identify potential challenges and solutions for integration.

The Rationale: Assessing integration ensures that the post-investment phase is smooth, efficient, and adds value to the existing technological ecosystem.

7. Final Reporting

Goal: To compile a comprehensive and detailed report of findings, translating the technical, security, financial, and integration assessments into actionable insights.


  • Summarize key findings, opportunities, and risks.
  • Provide recommendations for action or further analysis.
  • Support decision-making processes with detailed insights.

The Rationale: The final report is a pivotal tool for decision-making, offering stakeholders a consolidated view of the findings to inform their investment strategies.

Value Creation Through Software Development

Software development is a critical driver of value creation in private equity investments. Here’s how it helps portfolio companies become better positioned for growth, enhance competitiveness, and grow valuation.


Software development on laptop, phone, tablet. Technology of create software, code of mobile applications. Programming responsive layout of graphic interface, ui, ux concept.

A flexible and responsive software development strategy ensures that companies can swiftly pivot and adapt their products, aligning with emerging market trends and user demands. It is about having the structural nimbleness, technological tools, or a partner that can translate insights into action promptly.

With agile software development or a knowledgeable development partner, portfolio companies can quickly leverage emerging technologies with improved features and new products that better serve user needs. This ensures that the software remains competitive and relevant and continues to drive user engagement and revenue.

Tips for Innovation

  • Equip portfolio companies with the agility or a dependable development partner to consistently innovate and adapt.
  • Build a flexible software development ecosystem or collaborate with a proven partner to iterate and enhance products rapidly.

Quality Assurance

"Need to scale your QA team?" CTA

A well-executed QA process ensures a product that works flawlessly and is secure and compliant with relevant regulations. 

Core Components What it Involves Why it Matters
Ensuring Functionality and Performance Conducting extensive tests under varied conditions to ensure consistent, reliable performance. Guarantees a smooth, intuitive user experience, promoting satisfaction and loyalty.
Security Assurance Identifying and mitigating potential security vulnerabilities through rigorous testing. Enhances user trust by ensuring robust data protection and privacy.
Meeting Regulatory Standards Verifying that the software adheres to industry-specific regulations and standards. Minimizes legal risks and boosts the product’s credibility and trustworthiness.

For private equity investors, backing companies with strong QA means investing in reliability, user satisfaction, and legal integrity, directly influencing positive market reputation and investment value.

Collaborating with a specialized QA provider equips PE portcos with the agility and expertise to swiftly navigate market demands, ensuring timely, reliable, and innovative software releases that enhance investment value.

Accelerated Time to Market & Faster Deployment

DevOps Concept with Infinite Loop on Abstract Technology Background – DevOps Toolchain Concept

For private equity firms, speed to market translates into a competitive advantage. It means that their portfolio companies can swiftly capitalize on market opportunities, adapt to changing trends, and enhance user satisfaction. 

The faster a product release or update reaches the market, the quicker it can generate revenue, user data, and insights, which are pivotal for informed decision-making and strategic advancements.

Here are a few examples of scenarios where a reliable development partner can be invaluable in accelerating product timelines. 

  • Automated Deployment: Implementing automation tools and practices to streamline and accelerate the deployment process, reducing manual effort and errors.
  • Rapid Prototyping: Speeding up the creation and testing of prototypes, enabling quicker iterations and refinements based on feedback.
  • Feature Rollouts: Ensuring that new features are developed, tested, and rolled out swiftly, keeping the product competitive and aligned with user needs.
  • Resource Augmentation: Providing additional skilled resources to boost the development capacity, enabling faster completion of projects.
  • Expert Consultations: Offering expertise in specialized areas to hasten decision-making and implementation of tech solutions.
  • Technology Integrations: Assisting in integrating new technologies quickly and efficiently to enhance product capabilities and performance.
  • GenAI & ML Implementations: Speeding up the integration of generative artificial intelligence and machine learning capabilities to enhance product intelligence and user experience.

A development partner like KMS Technology is instrumental in optimizing the pace at which private equity portfolio companies can innovate, develop, and deploy software products. 

Private Equity Tech Portfolio Software Development & Consulting

KMS Technology sets the bar in software engineering and private equity partnerships. As software company investors and operators ourselves, we go beyond the scope of traditional service providers, acting as a strategic ally and enhancing investment growth. 

Make smarter technology decisions with help and insights from experienced private equity tech portfolio developers and consultants.

Schedule a Free Consultation

Quickly ramp-up teams and accelerate the delivery of your new software product.