Many proprietary technology platforms are sufficient to deliver the revenue milestones and market penetration planned for mid-cap investments. But not all have the architecture to support a step change in scale required by the next acquirer. In these cases, extensive re-engineering is need to maximise ROI, which requires a clear technology strategy as part of the initial investment thesis.

Rebuilding technology has many ‘unknown unknowns’, risking service interruption and delayed ‘business as usual’ product development. The optimal way to avoid service interruption is to modularise the existing technology and then re-engineer in stages, launching new components in a parallel platform. Not every component needs to be re-engineered as some can instead be ‘wrapped’ in interfaces that work with the new platform.

Nearer the start of the investment period there is a range of options of ‘effort vs. outcome’ and it is tempting to believe that ‘more can be achieved with less’ over a longer period. However the longer it takes, the greater the effort required to fix the larger technical debt, and as the technology nears its limits, the number of true options diminish rapidly. Resolving technical debt distracts from value creation, so realised exit valuations often diminish as the time to complete re-engineering is extended.