Legal due diligence vs technical due diligence

Legal due diligence checks the legal position of a software business: contracts, IP ownership, licences, data protection, employment, warranties and disclosure. It is essential, but it does not tell a buyer whether the technology itself is healthy.

Technical due diligence answers a different question: can this product, platform and engineering team support the valuation, roadmap and post-completion plan? That requires a review of source code, architecture, deployment process, cloud spend, security, technical debt, AI claims, documentation and team dependency.

The gap matters most in SaaS and AI transactions. A legal report may confirm that IP is assigned correctly, while a technical review may find that the code is fragile, the cloud bill is unsustainable, the deployment process is manual, or the claimed AI is a thin wrapper around commodity tooling.

The best approach is collaborative. The legal team identifies transaction risks and disclosure points. The technical diligence team validates the engineering reality behind them. Together, that gives the buyer clearer negotiation points, better post-close planning and fewer surprises after completion.