M&A Counsel for Technology Companies

Buying or selling a technology company is not the same as acquiring a traditional business. The value sits in intangibles — source code, intellectual property, customer data, and the engineers who built it all — and that is precisely where the risk hides. Technology-company transactions can raise issues involving software, intellectual property, data, and commercial arrangements that warrant focused review.

This page covers technology deals from sell-side readiness to ongoing counsel after closing; our Mergers & Acquisitions page covers deal counsel for buyers and sellers of any business.

Why Technology Deals Are Different

In a conventional acquisition, you can inspect the inventory and walk the floor. In a tech deal, the most valuable assets are invisible: lines of code, a patent portfolio, a data set, a team’s institutional knowledge. Confirming that those assets exist, that the company actually owns them, and that they transfer cleanly is the heart of the work — and the place where unprepared deals fall apart.

Sell-Side Readiness

The best time to prepare for tech M&A diligence is before the buyer is in the room. Buyers often judge the quality of management by the quality of the records. Every problem found early is either fixed or disclosed — and a disclosed problem is a negotiating point, not a lawsuit.

IP chain of title

The single most common problem we find in technology diligence is a broken chain of IP title. Code written by a founder before the company existed, contributions from contractors who never signed assignment agreements, and employee inventions governed by varying state rules can all leave a company owning less of its own technology than it believes. We trace ownership rigorously and resolve gaps through representations, pre-closing assignments, and targeted indemnities.

The seller takeaway: do not wait until diligence to discover that a developer never assigned the code.

Contracts, data and privacy

Customer data is often a core asset — and a regulated one. How that data was collected, what the privacy policy promised, and whether it can legally transfer in a sale all bear on the deal. We review data practices, privacy representations, and the assignability of key customer and vendor contracts so the revenue you’re buying actually comes with you.

If major customer contracts cannot transfer or can terminate after a sale, valuation may change.

Open source

Modern software is built on open-source components, and many open-source licenses carry obligations — some of which can require disclosure of proprietary code. A buyer needs to know what’s under the hood. We review the company’s open-source usage and third-party licenses to surface obligations and restrictions before they become a post-closing surprise.

AI-generated code

Vibe coding is a term commonly used for building software mainly by prompting an AI tool and accepting what it generates. It raises three questions: whose terms govern the tool, whether generated code can bring open-source license conditions, and what records you can show an investor or buyer.

Five things to consider first

Items to consider, not a template; what fits depends on your company.

• A list of each AI coding tool, its account owner, plan and dated terms.
• A written, dated AI-use policy.
• A check for signed assignments and any contractor AI-use disclosure requirements.
• A license scan and human review of AI-assisted code before merge.
• One dated file holding these records.

Buy-Side Due Diligence

A buyer needs to know whether the target can legally sell what it has built. A good diligence process does not simply collect documents. It converts findings into deal decisions: price adjustments, special indemnities, closing conditions, escrow terms, covenant packages, remediation plans, disclosure schedules, or a decision not to proceed.

Technology companies often assume that possession of data means the right to use it. Diligence should test that assumption. Vendor diligence is especially important where the target’s product cannot function without a single provider.

For buyers, AI diligence should answer a simple question: is AI creating value the buyer can lawfully and reliably acquire, or is it creating hidden exposure through data misuse, third-party dependency, model opacity, security risk, or intellectual-property uncertainty?

Software M&A Due-Diligence Checklist

Before signing a letter of intent, purchase agreement, merger agreement, or investment agreement, deal teams should evaluate at least the following:

• Corporate authority and capitalization — formation documents, equity ownership, options, SAFEs, convertible notes, investor rights, approvals, and consents.
• Intellectual property ownership — patents, trademarks, copyrights, trade secrets, source code, invention assignments, contractor agreements, licenses, and encumbrances.
• Software and product review — code ownership, architecture, scalability, technical debt, dependencies, APIs, integrations, and development practices.
• Open-source software risk — copyleft licenses, attribution obligations, license notices, vulnerability management, and software bills of materials.
• Customer and revenue contracts — SaaS agreements, enterprise MSAs, SLAs, data processing terms, assignment clauses, change-of-control restrictions, termination rights, and most-favored-customer provisions.
• Vendor and cloud infrastructure — hosting, payment processors, API providers, data subprocessors, uptime commitments, escrow, disaster recovery, and vendor concentration.
• Cybersecurity — policies, incident history, penetration tests, SOC 2 reports, remediation, access controls, logs, backup, and incident response.
• Data privacy and data rights — personal information, sensitive data, consent, retention, international transfers, privacy notices, and sector-specific obligations.
• AI and automated decision-making — model ownership, training data, output rights, bias testing, human oversight, vendor AI tools, and governance controls.
• Regulatory and industry compliance — export controls, sanctions, CFIUS, antitrust, HSR, SEC disclosure considerations, and sector rules.
• Employment and contractor matters — key employees, restrictive covenants, invention assignments, contractor classification, and retention packages.
• Litigation and dispute risk — threatened claims, IP disputes, customer disputes, privacy complaints, investigations, and indemnity demands.
• Deal-structure risk — asset sale vs. stock sale vs. merger, tax treatment, consents, excluded liabilities, escrows, earnouts, and closing conditions.

Our technology M&A due diligence checklist goes further on most of these headings, and our guide to asset purchase vs. stock purchase covers the choice between those two deal structures.

From LOI to Closing

A buyer may want an asset purchase to select specific assets and avoid certain liabilities. A seller may prefer an equity sale for tax, simplicity, or continuity reasons. The structure affects contracts, consents, tax treatment, employee transitions, assignment of IP, and post-closing liabilities. Tax and accounting advisors should be involved early.

A tech company sale may involve a letter of intent, confidentiality agreement, asset or stock purchase agreement, merger agreement, disclosure schedules, IP assignment documents, employee offer letters, founder restrictive covenant agreements, transition services agreement, escrow agreement, earnout terms, consulting agreements, customer consents, board or shareholder approvals, and closing certificates.

The purchase agreement will often include representations about IP ownership, software, open-source code, privacy, security, contracts, taxes, employees, litigation, and compliance. If diligence does not support those representations, the deal may slow down or the buyer may demand special indemnities, escrow, or price reductions. Diligence finds problems before closing; reps and warranties pay for the ones found after.

Earnouts, Escrow and Indemnity

Technology valuations often rest on future performance, which makes structure — asset vs. stock, the treatment of equity and options, and earnouts tied to revenue or product milestones — central to bridging buyer and seller expectations. Earnouts in particular reward careful drafting: how the metric is measured, who runs the business during the earnout, and what triggers acceleration are where value is won or lost.

Earnouts are often used to bridge valuation gaps, but they can create disputes if the agreement does not clearly define the metrics, calculation method, buyer obligations, seller access rights, timing, reporting, tax treatment, and dispute process.

In a business sale, indemnification is the contractual system that decides who pays when a post-closing problem appears. The indemnification article is where diligence findings become money terms. An escrow places part of the purchase price with a third-party escrow agent for a negotiated period. A holdback is typically retained by the buyer and released later if no covered claims arise.

The buyer should not assume it has an offset right unless the agreement says so. The seller should not assume earnout payments are insulated from indemnification claims unless the agreement says so.

Post-Closing Integration and Ongoing Counsel

After closing, the buyer usually controls the business. Once the buyer owns the business, the buyer bears the operational consequences of undisclosed or misallocated risk. We assist with post-closing integration and contract remediation, and with the transition, earnout tracking and escrow release the purchase agreement provides for.

Retaining the team

In technology, the people frequently are the asset. Deals routinely hinge on retaining founders and key engineers through retention packages, equity rollover, and employment or consulting agreements. Restrictive covenants like non-competes vary dramatically by state — California generally voids employment non-competes, subject to statutory exceptions; Arizona and Texas may enforce restrictions that satisfy their respective legal requirements — and getting this right is essential when your three states have three different rules.

For buyers, retention planning may be as important as legal documentation.

Ongoing counsel

For legal guidance after the deal, our ongoing outside general counsel service supports growing companies without building an in-house department.

Multi-State, Built for How Tech Companies Operate

Technology companies rarely stay inside one state’s borders — a Scottsdale company with California customers and remote engineers in Texas is the norm, not the exception. As a firm serving clients in Arizona, California, and Texas, we counsel deals that span all three, with California’s demanding standards as our baseline.

Guides for Technology Deals

• Technology M&A Due Diligence Checklist: What Buyers, Sellers, and Investors Need to Review Before Signing
• Selling Your Tech Company? What Buyers Will Check in Due Diligence
• Vibe-Coded Your Product? Tool Terms, Licenses and Investor Questions
• Asset Purchase vs. Stock Purchase: Which Fits Your Deal?
• Representations and Warranties: Where a Business Sale Allocates Its Risk
• Indemnification in a Business Sale: Caps, Baskets, Escrows, and Who Actually Pays
• Earnouts in Business Sales: How to Structure Them