I run a group that provides due diligence services to acquirers. As such, our business is bellwether for the M&A market. We have seen, as have others in the space, a number of transactions slowed down or put on hold in recent weeks. With regards to “holds,” clients have told us that they are waiting see what happens. Meanwhile, other clients have decided to move ahead as they normally would.

Deals that are moving ahead are certainly feeling some friction from the verities of the day. But as nearly every business professional on the planet is working hard to conduct business from their home office — with the understanding that comes with being in the same boat and with a little extra effort — we can all make the wheels of commerce turn.

Certainly, there’s also a challenge in getting to know the other party in a transaction — both the humans involved and the company from the perspective of tech due diligence. The reality is that it’s harder for inquirers to get the intuitive feel they would want for all aspects of the business and for the technology itself. Acquirers will be limited in terms of the exposure they can get to the technology. A target that might willingly let the CTO look over a shoulder at the code or who will happily whiteboard some details of the architecture will be less forthcoming via video conferencing.

The solution is twofold:

First, acquirers should set expectations for more than usual protections in the terms of the deal. Their counsel should be able to set up the negotiation of terms based on an acknowledgment that the due diligence will be less in-depth out of the present necessity than in normal circumstances. Accordingly, there should be an expectation on the target’s side for more protective reps and warranties, larger holdbacks and other deal elements reflecting the unusual uncertainty and risk.

Second, enlist trusted third-party due diligence providers to overcome the lack of access to the technology. Targets should be willing to share their code, even via remote upload, with a reputable third party. This should not preclude CTO to CTO video chats, but quantitative analysis of the code can and should inform the qualitive assessment. The code is where the rubber meets the road. Code analysis can reveal issues with the security, licensing, design and quality of the code that will need to be accounted for in the acquirer’s future plans. In some cases, results may impact deal terms and valuation. What’s more, the contents of the code can reveal a great deal about the way a company develops software. We’ve seen significant correlation between what’s in the code and the quality of the processes used to produce it.

By leveraging sharp M&A attorneys to ensure protections in the definitive agreement and a trusted third party to dig into the code, savvy acquirers should be able to forego dinners and handshakes, and still take advantage of present deals in an effective, well-informed and efficient manner.

Phil Odence, General Manager at Synopsys Software Integrity Group