3 Tech Due Diligence Red Flags That Could Sink Your Next Acquisition

3 Tech Due Diligence Red Flags That Could Sink Your Next Acquisition

Ever wonder why some tech acquisitions crash and burn while others thrive? After evaluating hundreds of M&A deals, I’ve learned that what you don’t see in the tech stack matters more than the flashy features. Let me walk you through the warning signs most buyers miss.

When Code Quality Lies Like a Polished Coin

Imagine buying a rare coin only to discover it’s been buffed to look perfect – that’s exactly how some codebases appear during acquisitions. Last year, we reviewed a “enterprise-ready” SaaS platform that seemed flawless… until we looked closer.

The Spaghetti Code Trap

Beneath the surface, we found what developers dread:

// The "Do Everything" file (actual discovery)
function handleAllBusinessLogic() {
// 2,000+ lines of tangled code
// Payment processing + user management + analytics
// All fighting for attention
}

This wasn’t just messy – it was like finding termites in the foundation. Our rule of thumb now? Any file over 500 lines gets automatic scrutiny. If developers can’t explain it simply, that code could cost you later.

The Scaling Illusion

Many systems handle demo-day loads beautifully, but crumble when real users arrive. We learned this the hard way during an e-commerce platform test:

When “Works Great” Meets Reality

• Database connections maxed out at just 150 users
• Checkout delays jumped from 2 seconds to 16 under load
• Their “performance boost” cache actually slowed things down

The fix wasn’t sexy but it worked:

// Simple caching done right
async function fetchProduct(id) {
const cachedData = await redis.get(`product_${id}`);
if (!cachedData) {
const freshData = await database.query('...');
redis.setex(`product_${id}`, 3600, freshData);
return freshData;
}
return cachedData;
}

Third-Party Time Bombs

Outdated dependencies are the landmines of tech acquisitions. One fintech deal nearly collapsed when we found:

“127 libraries with known vulnerabilities, including a payment module that hadn’t been updated since the Obama administration”

Dependency Check 101

• Red zone: Abandoned projects (no commits in 2+ years)
• Yellow flags: Security advisories without fixes
• Green lights: Actively maintained with recent patches

Your Acquisition Safety Checklist

From 47 tech evaluations, here’s what actually matters:

1. Follow the blueprints: How organized is the architecture?
2. Count the IOUs: What’s the real technical debt cost?
3. Test the assembly line: Can they deploy fixes quickly?
4. Check the bus factor: What if key developers leave?
5. Map the terrain: Is cloud infrastructure properly managed?

Don’t Buy a Pig in a Poke

The most expensive acquisition mistakes happen when buyers focus on shiny features instead of structural soundness. Treat tech due diligence like inspecting a vintage car – kick the tires, check under the hood, and always assume there’s something the seller hasn’t spotted. What hidden surprises have you found during technical evaluations?

Related Resources

You might also find these related articles helpful:

• 7 Deadly Mistakes Collectors Make with Obscure INS Holders (And How to Avoid Them) – I’ve Seen These Mistakes Destroy Collections – Here’s How to Avoid Them After 27 years specializing in…
• Forging Unbreakable Cyber Defenses: An Ethical Hacker’s Guide to Advanced Threat Detection – The Best Defense Is a Good Offense: Modern Cybersecurity Tool Development In cybersecurity, waiting for attacks isn&#821…
• The Hidden Significance of Obscure INS Holders: A Numismatic Deep Dive – Secret Treasures in Coin History Let me share something fascinating I uncovered while researching Pacific Northwest coin…