Legal aspects of due diligence for technology companies

Due diligence (DD) is an investigation aimed at providing the investor with reliable and complete information about the legal, financial and organisational situation of the company that is to be the subject of the transaction. It involves ‘looking under the bonnet’ of the company and should enable the investor to make an informed assessment of the risks that may affect the valuation or even the decision to invest capital.

Due diligence of technology companies requires a classic formal and legal review by lawyers (corporate aspects, contracts, taxes, court and administrative proceedings, etc.), but due to the specific nature of the industry, where the value of a company depends on the quality and innovation of its technology, certain areas require review by technology experts. This interdisciplinary approach is of significant importance and not only allows for a better understanding of the company’s technological potential, but also minimises the risks associated with outdated technology, IP infringements and the regulatory environment.

Why is due diligence in tech different?

Technology companies – including those based on automation, robotics or companies operating in the SaaS model – generate value mainly through source code, know-how, databases, AI models or licence agreements. Growing investor interest in the TMT (Technology, Media, Telecommunication) sector further increases the pressure to thoroughly examine these assets before investing. This is evidenced, among other things, by intensive financing rounds in the field of robotics and automation – by July 2025 alone, start-ups involved in the development of robotics technologies had raised a total of just over $6 billion[1] . In 2024, the global robotics market was valued at $53.2 billion, and according to estimates by the IMARC group, this market is heading towards $178.7 billion by 2033[2] . However, the value of companies depends on the correct regulation of legal issues, which can be extremely complex in the world of new technologies.

Companies in this market operate in an environment of rapid innovation cycles, intense competition and pressure to continuously improve their products. A lack of up-to-date solutions or the risk of technological obsolescence can significantly reduce their market potential in a short period of time. Therefore, technological due diligence should allow investors to better understand the company’s growth prospects and assess the sustainability of its technological advantage.

Key areas of DD analysis

• IT systems and architecture. Investors should pay attention to the level of modernity of the infrastructure, its performance, stability and scalability. Automation and robotics technologies must be compatible with customers’ industrial ecosystems. The analysis should include an assessment of the compatibility of the company’s solutions with existing production systems, management platforms or ERP (Enterprise Resource Planning) and MES (Manufacturing Execution System) software.
• Intellectual Property. It is essential to verify the company’s patents, registered utility models, and copyrights to software and control algorithms. It is equally important to check the terms and conditions under which the company uses external licences – whether they are adequately secured and do not carry the risk of infringing the rights of third parties.
• Trademarks, internet domains and other markings identifying the company on the market. The examination checks whether the company has made the correct applications to the relevant authorities and whether it actually has the exclusive right to use certain markings. In the case of internet domains, it is crucial to determine their formal owner and to analyse whether the company is exposed to the risk of disputes over domain rights or loss of the domain as a result of failure to comply with registration formalities.
• Assets protected by trade secrets – know-how, algorithms, business models, user data or production processes. Due diligence should verify whether the company has implemented effective mechanisms to protect this information, in particular by properly regulating confidentiality clauses in contracts with employees, associates and contractors, as well as by implementing internal security procedures. Failure to implement adequate safeguards may lead to a loss of value for the company and legal disputes.
• R&D team and technical expertise. The analysis should cover the qualifications of the engineering staff, the pace of product development and the ability to adapt new technologies. It is worth assessing whether the team has the expertise not only to maintain existing solutions, but also to implement innovations that respond to market challenges.
• Artificial intelligence (AI). In the case of companies using AI solutions, it is particularly important to determine who owns the rights to the content or algorithmic models produced, and whether the process of their creation infringes the rights of third parties, such as copyrights to training data. In addition, it can be problematic to ensure that the systems used comply with personal data protection regulations and upcoming EU regulations, such as the AI Act, which imposes new obligations on companies in terms of risk classification and monitoring.
• Cybersecurity. This is extremely important, as a high level of automation carries risks related to system security. Due diligence should include verification of the security measures in place, incident response procedures, penetration test reports and system resilience to external attacks. The company should have appropriate security policies, back-up mechanisms and business continuity plans (BCP – Business Continuity Plan, DRP – Disaster Recovery Plan). Compliance with applicable standards and regulations, such as ISO standards or obligations under the NIS2 Directive, is essential.

Typical investment risks

Investments in companies in the automation and robotics sector, despite their high growth potential, carry a number of specific technological risks. One of the most common is technological obsolescence – in the reality of a rapid innovation cycle, solutions that are competitive today may lose their value within a few years. An equally serious threat is excessive dependence on a single component or technology supplier (vendor lock-in), which increases the risk of supply chain disruption and limits the company’s flexibility.

Regulatory risks are also extremely important – the automation and robotics industry is becoming increasingly regulated, especially in the area of system security and the use of artificial intelligence. Upcoming regulations, such as the EU AI Act and new standards for industrial robotics, may require costly adjustments and affect the company’s business model. For investors, this means the need to identify early on potential legal and technical barriers that may limit the return on investment.

In practice, legal audits of technology companies often reveal mundane problems related to negligence in documentation and a lack of a structured approach to intellectual property management. Many start-ups in the early stages of development focus primarily on creating and implementing technological solutions, putting formal and legal issues on the back burner. As a result, corporate documentation concerning software copyrights, licence agreements or the transfer of rights from associates and subcontractors is often incomplete, inconsistent or even non-existent.

Frequent shortcomings also include failure to register trademarks or complete the formalities related to maintaining internet domain protection, which exposes the company to the risk of losing key identification assets. The use of open source software without a thorough analysis of the licence terms can also be problematic, as it may lead to infringements and serious restrictions on the commercial use of the products being developed.

In more developed companies, the risk is not so much the lack of documentation as its dispersion and the lack of effective management of the “technology stack”.

Summary

It is crucial for investors to treat due diligence of companies in the automation and robotics industry not as a one-off formality, but as an integral part of the investment process.

In practice, such an examination is much more than an analysis of code or a review of contracts and technical documentation. It is a comprehensive assessment of the company’s ability to maintain and develop its competitive advantage in a demanding, innovative technological environment. It takes into account not only the state of current solutions, but also the potential of the team, the quality of intellectual property protection, the security of systems and their compliance with regulations, and integration capabilities. Only such a cross-sectional approach allows investors to assess whether a company is prepared for future technological and regulatory challenges and, thus, whether its business model is sustainable in the long term.

[1] https://news.crunchbase.com/robotics/startup-funding-rises-h1-2025-ai-apptronik-data/

[2] https://www.imarcgroup.com/robotics-market