A CTO’s Framework for Strategic Decision-Making: Lessons from Colonial Coin Collecting
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October 8, 2025When Technical Debt Sinks Deals: An M&A Consultant’s Hard-Won Lessons
After reviewing hundreds of acquisition targets, I’ve seen more deals collapse from hidden tech issues than from financial problems. Let me share what keeps acquisition teams awake at night – and how to spot true deal-breakers before they cost you millions.
Seeing Beyond the Surface: What Really Matters in Tech Stacks
When Pretty Code Hides Ugly Truths
That polished demo? Meaningless. What matters is what happens when 10,000 users hit the system at midnight. Here’s what we always check first:
- The Maintenance Trap: Reasonable tech debt vs. unmaintainable spaghetti code
- The Open Source Gamble: Properly licensed components vs. legal time bombs
- The Team Handoff Test: Can new engineers understand this in under a week?
“Last quarter, a $20M deal died when we found a critical payment module held together by outdated libraries no one understood.”
Your Tech Evaluation Checklist
Every acquirer needs these non-negotiables:
def should_acquire?(tech_stack):
security = audit_vulnerabilities(tech_stack)
scalability = stress_test(peak_load * 3)
documentation = check_howto_guides()
return security.passed? && scalability.passed? && documentation.exists?
Scalability: The Silent Deal Killer
Infrastructure That Can’t Grow With You
These bottlenecks destroy post-acquisition plans:
- The User Limit: Systems that crash above 500 concurrent users
- The Database Time Bomb: Hardcoded limits with no clustering
- The Deployment Nightmare: Manual processes requiring original developers
A Real-World Horror Story
We once found an “enterprise” platform running on:
// Authentication "System"
function checkPassword(user) {
// No encryption
// Compares plaintext in SQL query
// Returns true if error occurs
}
The Hidden Risks You Can’t Afford to Miss
Shadow IT Landmines
Nearly 1 in 4 acquisitions discover unauthorized systems post-close. Protect yourself:
- Run automated dependency checks (like Snyk or WhiteSource)
- Verify cloud service contracts line-by-line
- Audit admin access across all environments
When “Good Enough” Is Actually Dangerous
“We almost walked from a great acquisition because of messy code – until we realized their disaster recovery process was the best I’ve ever seen.”
The Practical Tech Due Diligence Toolkit
Tools That Reveal The Truth
These never leave my investigation kit:
| What We Use | What It Finds | Why It Matters |
|---|---|---|
| SonarQube | Code quality hotspots | Flags unmaintainable code |
| Locust | True load capacity | Reveals scaling limits |
| OWASP ZAP | Security vulnerabilities | Prevents post-deal breaches |
How Tech Flaws Impact Valuation
Recent deals show:
- 28% average reduction for missing test coverage
- $2M security escrow holds for outdated encryption
- Complete deal collapse when core APIs couldn’t scale
The Bottom Line: Protect Your Deal
Technical due diligence isn’t about perfection – it’s about avoiding surprises that rewrite deal terms six months post-close. Treat code like wiring in a house purchase: some wear is expected, but faulty foundations will burn you.
Action Steps for Smart Acquirers:
- Demand full access to key systems before LOI
- Test under real-world loads, not ideal conditions
- Follow the data trail – where are the real pain points?
- Bring engineers into discussions early, not just finance teams
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