Why More Deal Teams Are Running Technology War Games Before a Competitive Process
9/3/20264 min read
A practice migrating from large-cap M&A into the mid-market: sell-side deal teams running structured mock diligence exercises, sometimes called technology war games, before formally launching a sale process, simulating the specific questions a sophisticated buyer's technology diligence team is likely to ask and identifying gaps while there's still time to address them without deal timeline pressure.
This mirrors a broader pattern of large-cap deal practices gradually migrating down-market as mid-market deal teams and advisors gain access to the same caliber of specialized talent and methodology that used to be exclusive to the largest transactions.
What a Technology War Game Actually Involves
The exercise typically assembles a small team, sometimes internal, sometimes an outside technology advisor playing the role of a skeptical buyer's diligence team, to work through the exact categories of questions a real buyer would likely raise: requesting the API inventory, the vendor risk assessment, the disaster recovery test results, the software licensing documentation, and then evaluating honestly whether the company's actual answers would satisfy a genuinely thorough reviewer or would create the kind of follow-up requests that slow a live process down.
This differs meaningfully from a standard pre-sale technology audit, which typically focuses on identifying and fixing gaps. A war game specifically simulates the pressure and pacing of a real diligence process, testing not just whether the underlying documentation exists but whether the management team can respond to follow-up questions quickly and credibly under the kind of time pressure a live deal actually creates.
Why This Practice Is Spreading to the Mid-Market
Mid-market deal teams are adopting this practice for the same reason it proved valuable in larger transactions: it catches not just documentation gaps but performance gaps, moments where management, however well-prepared on paper, struggles to answer a pointed follow-up question confidently in real time. A management team that has never rehearsed responding to skeptical, specific technology questions under time pressure often performs less confidently in a live diligence process than the underlying substance of their answers would justify, simply because the format itself is unfamiliar and slightly disorienting the first time it happens for real.
Sell-side advisors increasingly recommend this exercise specifically for management teams at portfolio companies that have never been through a sale process before, or where the technology function is led by someone without significant prior experience being on the receiving end of institutional buyer diligence.
What Tends to Surface During These Exercises
Beyond straightforward documentation gaps, war games commonly surface communication and ownership problems: a management team that knows the answer to a technical question but has never agreed internally on who should be the one answering it during a real diligence call, creating hesitation or inconsistency that a live buyer's team would likely notice and interpret unfavorably. They also surface overconfident answers that don't hold up under a genuinely skeptical follow-up question, revealing gaps between what management believes about their own technology environment and what they can actually substantiate with documented evidence.
Building This Into Standard Exit Preparation
For funds with sophisticated deal teams and an active pipeline of portfolio companies approaching potential exits, building a technology war game into the standard pre-launch preparation checklist, alongside the more familiar financial and legal preparation work, gives management teams a genuine dry run before facing a live buyer, and gives the fund's own deal team an honest, current assessment of where the technology diligence workstream is likely to create friction in the actual process, well before that friction shows up in a live deal timeline where it's considerably more costly to address.
Why This Practice Resonates With Management Teams
Management teams who go through this exercise consistently report that it reduces genuine anxiety about the eventual diligence process, precisely because it replaces an abstract fear of the unknown with a concrete, rehearsed understanding of what to expect and how to respond. This has a secondary benefit beyond the specific gaps it surfaces: a management team that has already been asked the hard questions once, in a low-stakes practice setting, tends to perform noticeably more confidently and credibly when facing the same category of questions for real, which sophisticated buyers and their advisors notice and factor into their overall impression of how well-run the business actually is.
How This Trend Is Likely to Evolve
As this practice becomes more common in the mid-market, it's likely to become an expected part of standard exit preparation rather than a differentiating extra step, similar to how financial and legal pre-sale readiness reviews have long been standard practice. Funds adopting this discipline now, while it's still a genuine point of differentiation rather than a baseline expectation, are positioned to run smoother, faster processes than peers who wait until the practice becomes so universal that skipping it actively signals unpreparedness to a sophisticated buyer evaluating the opportunity.
A Practical Starting Point for Funds New to This Practice
Funds trying this for the first time don't need to replicate the full scale of a large-cap war game exercise. A half-day session, with an outside technology partner playing the role of a skeptical buyer's diligence lead and posing the specific categories of questions covered elsewhere in this series, vendor risk, security posture, licensing, architecture, gives most management teams a meaningful, actionable readout of where their actual responses would hold up and where they wouldn't, at a fraction of the time and cost a full mock diligence process would require. This lighter-weight version is often enough to surface the most consequential gaps and build genuine confidence heading into a real process.
Sigma Technology Consulting, Inc.
25 Years of Experience, Vetting & Procuring Technology Vendors
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