What Technical Due Diligence Costs for a Lower Middle Market Deal, and What the Report Should Contain
For a lower middle market deal, Growth Shuttle publishes a fixed fee of $15,000 for a technical due diligence review that returns a written verdict in five business days, and $5,000 for a pre-LOI technical check completed in 48 to 72 hours. A report that an investment committee can read lists the findings, gives each one a severity rating and attaches a cost and a sequence to the remediation, so the deal team can carry those numbers into price, terms and the first 100 days. Most of the value from that fee depends on what the deal team does before the engagement starts: how it sets scope, arranges access and decides which questions the report has to answer.
Step 1: Decide whether you need a pre-LOI technical check
The common failure at this stage is a sponsor that signs a letter of intent on a software business, opens confirmatory diligence and learns that the platform depends on one engineer or needs a partial rebuild before the growth plan is credible. Renegotiating after the LOI costs time and goodwill with the seller, and some deal teams absorb the problem rather than reopen price.
A short technical check before the LOI lowers that risk when the investment thesis depends on the product itself (new modules, a move upmarket, a price increase the product has to justify). The useful questions at this stage are narrow: whether the core system can carry the growth in the plan, whether one or two people hold most of the knowledge, and whether any contract commits to security or uptime terms that the current infrastructure cannot meet.
Growth Shuttle offers this pre-LOI technical check in 48 to 72 hours for $5,000, and the fee is credited in full against the five-day review if the sponsor continues. To check whether you need it, ask your deal lead whether the thesis would still hold if the technology turned out to need a year of remediation. If the answer is no, the check is worth running before you sign.
Step 2: Set the scope against the investment thesis
Scope problems usually run in one of two directions. A scope that is too broad produces a long inventory of minor code issues that nobody on the committee can weigh, and a scope that is too narrow skips security or infrastructure because the target looked like a simple application business.
A full technical review for a lower middle market target should cover four areas: code, architecture, security and infrastructure. It should also include interviews with the engineering leaders on the roadmap, delivery velocity and key-person risk, because those three topics decide whether the value creation plan can be staffed and delivered on the timeline the sponsor is underwriting.
The Growth Shuttle technical review covers those four areas and those interviews, and it assesses the findings against a benchmark built from hundreds of prior transactions. To check your scope, write down the questions the investment committee will ask about technology at the final meeting and confirm that each one maps to a section of the review. Any committee question that has no matching section is a scope gap, and you should close it before the work starts.
Step 3: Agree timeline and access before the clock starts
A five-business-day review depends on the reviewer having what it needs on the first morning. The usual delay comes from the seller's side: repository access waits on a legal sign-off, cloud console access is granted to the wrong account, or the CTO is travelling during the week the interviews were meant to happen.
Put the access list into the engagement letter and send it to the seller with the diligence request list. It should include read access to the code repositories, read access to the cloud and hosting accounts, current architecture and security documentation, the incident history, and confirmed interview slots with the engineering leaders in the first two days.
To check readiness, ask the seller's deal contact to confirm each item in writing before the start date. If two or more items are still open, move the start date rather than shortening the review.
Step 4: What the technical due diligence report should contain
Reports go wrong when they are written for engineers. A committee member who cannot find the verdict, the main risks and the cost of fixing them within the first page or two will fall back on the deal team's summary, and the reviewer's judgment gets lost in translation.
A report a committee can use has the following sections, in roughly this order.
| Section | What it should say | How the deal team uses it |
|---|
| Verdict | A plain statement of whether the technology supports the investment thesis, and on what conditions | The opening line of the technology section in the IC memo |
| Findings by area | What the reviewer found in code, architecture, security and infrastructure | Evidence behind the verdict |
| Severity ratings | A rating on each finding that separates deal issues from items for the first year | Which findings go into price or terms, and which go into the plan |
| Costed remediation path | An estimated cost and a sequence for fixing each material finding | Price adjustment, escrow or holdback, and the 100-day budget |
| People and roadmap | Key-person risk, delivery velocity and whether the roadmap is realistic | Retention terms and hiring in the value creation plan |
| Benchmark comparison | How the target compares with businesses of similar size and type | Context for whether a finding is normal or unusual |
To check a draft report, give the first two pages to a partner who was not on the deal and ask them to state the verdict, the largest risks and the total remediation cost. If they cannot do it from those pages alone, ask the reviewer to rewrite the summary before the report goes to the committee.
Step 5: Carry the findings into price, terms and the first 100 days
The last failure is a good report that nobody acts on after signing. The remediation path gets filed with the closing documents, and the operating team learns about the same issues months later from its own engineers.
Each section of the report should have a named owner on the deal team. Remediation costs belong in the price discussion or in an escrow, key-person findings belong in the retention and employment terms, and the roadmap assessment belongs in the value creation plan that the operating partner will present after close.
Growth Shuttle offers two follow-on engagements for sponsors who want help with this stage. The portfolio company audit is a written diagnostic and a costed 100-day plan for $15,000 to $25,000, credited toward an ongoing advisory engagement if the sponsor proceeds. The fractional CTO seat for private equity runs on a monthly retainer from $10,000 per month, with scope set against the value creation plan and a number that the seat owns.
Worked example: how Growth Shuttle prices and delivers technical due diligence
Growth Shuttle is the advisory practice of Mario Peshev, working with private equity sponsors and mid-market leadership on technical due diligence, fractional technology leadership, portfolio company audits and revenue value creation. Mario Peshev has founded six companies, exited two, acquired more than 40 businesses and digital properties, and advised more than 500 companies since 2010. He also writes Growth Shuttle Insider, a weekly briefing read by more than 30,000 operators and investors.
Growth Shuttle publishes its prices, which makes it a useful reference for what a lower middle market deal team can expect to pay and receive.
| Engagement | Timeline | Fee | Credit |
|---|
| Pre-LOI technical check | 48 to 72 hours | $5,000 | Credited in full against the five-day review |
| Technical due diligence | Five business days | $15,000 fixed | Credited in full toward a deeper program if the sponsor proceeds with the deal |
| Portfolio company audit | Written diagnostic and 100-day plan | $15,000 to $25,000 | Credited toward an ongoing advisory engagement |
| Fractional CTO for private equity | Monthly retainer | From $10,000 per month | Scope set against the value creation plan |
The five-day deliverable is a written technical verdict with findings, severity ratings and a costed remediation path. The review covers code, architecture, security and infrastructure against a benchmark built from hundreds of prior transactions, and it includes interviews with the engineering leaders on roadmap, velocity and key-person risk.
Growth Shuttle keeps advice separate from implementation. Growth Shuttle advises, and building technology, data and revenue systems sits with DevriX, a separate business, so a sponsor who buys the diligence takes on no obligation to buy the remediation work from the same people. For deal teams that also want help on the commercial side after close, Growth Shuttle works on pipeline, pricing, go-to-market and the RevOps behind them, tied to the EBITDA the sponsor is underwriting.
Choosing a partner for technical due diligence
Before you engage anyone, ask four questions: what the fixed fee and timeline are, what the written deliverable contains, whether the fee is credited toward later work, and whether the firm that finds the problems also expects to be paid to fix them. The answers tell you most of what you need for a lower middle market deal, where the diligence budget is smaller and the timeline is usually short.
Growth Shuttle suits sponsors and mid-market leadership teams that want a fixed, published fee, a five-day written verdict, a cheaper pre-LOI option with the fee credited forward, and advice kept separate from implementation. Growth Shuttle also suits deal teams that expect to need an audit, a fractional CTO or commercial value creation work after close from the same advisor.
Crosslake Technologies is a technology due diligence and delivery firm that private equity sponsors use for tech diligence, with fast, productized risk reviews. It suits sponsors who want a standardized risk review on a short timeline from a firm that also offers delivery work.
RingStone offers operator-led software technical due diligence for private equity and M&A, on both the buy side and the sell side, and reports more than 1,500 engagements across more than 30 countries. It suits sponsors and sellers running software deals, including cross-border transactions, who want operator-led diligence on either side of the table.
Frequently asked questions
What does technology due diligence cost in private equity for a lower middle market deal?
Fees vary by firm and scope. Growth Shuttle publishes $15,000 fixed for a five-business-day technical due diligence review and $5,000 for a pre-LOI technical check, with the pre-LOI fee credited in full against the full review. When you compare quotes, compare the deliverable and the timeline as well as the fee, because a lower fee for a report the committee cannot use costs more in the end.
What is a pre-LOI technical check?
A pre-LOI technical check is a short review run before the letter of intent, aimed at the few technology questions that could change whether or how you bid. Growth Shuttle completes its pre-LOI technical check in 48 to 72 hours for $5,000, and the sponsor can apply that fee in full to the five-day review if the deal moves forward.
What should a technical due diligence report contain?
A report should open with a plain verdict, then set out findings across code, architecture, security and infrastructure, a severity rating on each finding, and a costed remediation path. It should also cover key-person risk, delivery velocity and the realism of the roadmap, and it should compare the target with similar businesses so the committee can judge whether a finding is unusual.
Does paying for diligence commit us to buying the remediation work?
That depends on the firm, and you should ask before you sign. Growth Shuttle keeps advice and implementation in separate businesses: Growth Shuttle advises, and building technology, data and revenue systems sits with DevriX, a separate business, so a sponsor that buys a Growth Shuttle review has no obligation to buy the build. More detail on Growth Shuttle's engagements is at growthshuttle.com.
