The Digital Due Diligence Checklist for Private Equity Investors

Date: April 2025

Executive Summary

In today’s digitally driven economy, the most attractive investment opportunities in private equity are increasingly determined by a target company's digital maturity. Yet digital capability is often the most under-assessed area during due diligence. With the rise of customer acquisition via digital channels, reliance on data for decision-making, and the ever-expanding scope of cloud, martech, and automation technologies, overlooking digital can severely impact value creation.

This white paper presents a comprehensive 4,000-word guide to Digital Due Diligence for private equity firms. It outlines a proven, repeatable framework to assess digital capabilities pre-acquisition. It includes a granular checklist, common red flags, valuation risks, and sector-specific benchmarks to ensure that digital opportunity or exposure is surfaced before a deal closes. With deal timelines compressed and digital becoming increasingly central to post-close strategies, this guide is designed to help investors move faster and smarter.

Why Digital Due Diligence Matters Now

  • 80% of B2C engagement is now digital-first, yet fewer than 25% of PE firms have a digital diligence module integrated into standard operating models (source: Bain).

  • Digital channels account for over 50% of marketing spend across industries, yet very few CIMs detail channel ROI, martech ROI, or CAC-to-LTV metrics.

  • Software spend has grown by 5x since 2015 in mid-market companies, yet poor data integration and tool sprawl often lead to inefficiencies.

A failure to evaluate digital capabilities pre-acquisition leads to:

  • Overstated marketing performance

  • Undetected churn risks

  • Redundant or obsolete technology stacks

  • Missed growth opportunities post-close

The Five Pillars of Digital Due Diligence

  1. Digital Marketing & Acquisition

  2. Technology & Infrastructure

  3. Data & Analytics

  4. Digital Product & Experience

  5. Talent, Culture & Operating Model

Each pillar must be evaluated systematically to understand both digital risks and opportunities.

Pillar 1: Digital Marketing & Acquisition

Key Areas to Assess:

  • Channel mix: organic, paid, social, affiliate, referral

  • ROI by channel: CAC, ROAS, CPL

  • Attribution modeling (last-click vs. multi-touch)

  • Retargeting and remarketing strategies

  • Conversion rate optimization and testing

Sample Checklist:

  • Is there a unified source of truth for marketing performance (e.g., Looker, Tableau)?

  • What is the CAC:LTV ratio by segment and channel?

  • Are marketing and sales aligned in their attribution?

  • What tools are used for A/B testing?

Red Flags:

·       70% of budget in one channel (e.g., paid search)

  • No clear CAC benchmarks or LTV tracking

  • Absence of CRM-driven segmentation

Benchmarks:

  • LTV:CAC ratio of 3:1 or greater

  • Email open rates > 20%, unsubscribe < 1%

  • Paid media ROAS > 3x

Pillar 2: Technology & Infrastructure

Key Areas to Assess:

  • Tech stack documentation (marketing, sales, finance, ops)

  • Systems integration and data flow mapping

  • Subscription cost trends and vendor lock-in risk

  • Cloud infrastructure and security posture

Sample Checklist:

  • Inventory of platforms and licenses

  • API availability and connectivity

  • % of legacy/on-prem tools vs. SaaS

  • Redundancy in tool functionality

  • M&A integration readiness

Red Flags:

  • 20+ disconnected tools

  • No formal security protocols or audits

  • Manual or spreadsheet-driven core workflows

Benchmarks:

  • Tech onboarding < 30 days per platform

  • <10% duplicate records across systems

  • Cybersecurity insurance and recent pen test in place

Pillar 3: Data & Analytics

Key Areas to Assess:

  • Data capture: sources, frequency, granularity

  • Data governance and hygiene

  • Use of predictive analytics or forecasting

  • BI tools and self-service adoption

Sample Checklist:

  • Is there a centralized data warehouse?

  • How are key metrics like churn, CAC, and NPS calculated?

  • Does the team use cohort analysis, LTV forecasting, and funnel tracking?

  • Is there a culture of data fluency across teams?

Red Flags:

  • Manual reporting from spreadsheets

  • No universal data definitions

  • Lack of tracking pixels or GA4 configuration

Benchmarks:

  • Daily data sync for core metrics

  • 50%+ of execs using self-serve dashboards

  • NPS tracking with >20% response rate

Pillar 4: Digital Product & Customer Experience

Key Areas to Assess:

  • Mobile and web experience quality (e.g., load times, UX, navigation)

  • Online purchase flows or lead generation friction

  • Personalization and recommendation engines

  • Use of customer portals, chat, bots, etc.

Sample Checklist:

  • What is the average page load speed (mobile vs desktop)?

  • How many steps to purchase or book a service?

  • Are customer journeys mapped and optimized?

  • Are product usage analytics tools like Hotjar or FullStory in place?

Red Flags:

  • NPS or CSAT below industry benchmarks

  • Broken or non-responsive mobile pages

  • High cart abandonment rates with no CRO plan

Benchmarks:

  • Page load speed < 3s mobile

  • Cart abandonment < 60%

  • Session-to-lead conversion > 10%

Pillar 5: Talent, Culture & Operating Model

Key Areas to Assess:

  • In-house digital capabilities (growth, product, analytics, martech)

  • Culture of experimentation and agility

  • Organizational design and decision-making velocity

Sample Checklist:

  • Is there a digital lead in the C-suite or reporting to CEO?

  • What % of employees are digitally native or data literate?

  • How are experiments run and evaluated?

  • Are incentives aligned with digital KPIs?

Red Flags:

  • 100% outsourced marketing

  • Siloed tech, ops, and marketing teams

  • No agile or cross-functional workflows

Benchmarks:

  • Digital headcount > 10% in digitally enabled companies

  • Monthly experimentation cadence

  • Quarterly digital training or workshops

How to Integrate Digital Diligence Into Your Deal Process

1. Pre-LOI

  • Use digital signals as part of initial screening: website traffic, brand visibility, media footprint, Glassdoor ratings, app store performance

2. LOI to Diligence Kickoff

  • Commission a light digital audit or competitive benchmark

  • Request digital KPIs and martech inventory as part of the diligence data room checklist

3. Formal Diligence Period (30-60 Days)

  • Assign a digital specialist (internal or third party)

  • Use a standardized scoring matrix (1-5 scale by pillar)

  • Create a 2-page digital summary for IC decks

4. Post-Close Integration

  • Use diligence insights to feed the 100-day plan

  • Prioritize quick wins and talent needs uncovered during diligence

Digital Diligence Outputs: What to Deliver to IC

  • 1-page Digital Maturity Scorecard (summary + pillar ratings)

  • Red/Yellow/Green risk flags by function

  • Digital KPIs snapshot (vs. industry benchmarks)

  • Capex/Opex required for digital transformation

  • Integration roadmap if part of platform play

Sector-Specific Digital Watchpoints

B2C/Retail

  • Omnichannel experience, reviews, inventory visibility

  • Loyalty programs, influencer strategies

SaaS

  • Product analytics, PLG readiness, churn metrics

  • API integrations, billing systems, net revenue retention

Healthcare

  • HIPAA compliance, patient scheduling, telehealth stack

  • Online appointment flow, insurance validation tools

Industrial & Services

  • Online quoting, dispatch automation, local SEO

  • Technician tracking, field enablement apps

Common Mistakes and How to Avoid Them

  • Assuming digital = marketing only

    • Digital diligence must be cross-functional.

  • Delegating to a generalist

    • Use operators, former CMOs, or specialist firms for accurate evaluation.

  • Evaluating tools, not outcomes

    • Focus on how well tech and data drive real business outcomes.

  • Waiting until post-close

    • At that point, fixing problems becomes expensive and political.

Tools & Resources for Digital Due Diligence

  • Website graders (e.g., PageSpeed Insights, GTMetrix)

  • Tech stack lookup (e.g., BuiltWith, Wappalyzer)

  • Traffic analytics (e.g., SEMrush, SimilarWeb)

  • Data mapping templates

  • Martech audits and budget breakdown templates

  • BI maturity self-assessment tools

Conclusion

Digital due diligence is no longer a luxury—it’s a necessity. As value creation leans more heavily on growth, digital scalability, and modern customer experience, PE firms must evolve their diligence playbooks accordingly. Firms that integrate digital diligence early and thoroughly will:

  • Make smarter bids

  • De-risk integrations

  • Unlock value faster post-close

Digital readiness is a leading indicator of exit performance. Make it a core part of your next deal evaluation.

Sources

  • Bain & Company: "The State of Digital in PE"

  • BCG: "Digital Due Diligence 2.0"

  • McKinsey: "Private Equity's New Playbook"

  • Forrester: "Digital Maturity Benchmarks"

  • Deloitte: "Bringing Tech Into the Diligence Process"