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.