How a Prolonged Service Outage Can Expose Critical Tech Risks in M&A Due Diligence

When Technology Fails, Deals Follow: The Hidden M&A Dealbreaker

Picture this: Your dream acquisition target suddenly goes dark for days. Customers rage online, revenue screeches to a halt. Suddenly, those glossy financials don’t look so shiny. In M&A tech due diligence, we need to look beyond spreadsheets – a company’s crisis response reveals its true tech health. The recent Collectors Universe outage isn’t just an IT headache – it’s a cautionary tale for dealmakers. I’ve seen deals crater because buyers ignored these warning signs until it was too late.

Reading Between the Outage Lines

1. Recurring Downtime = Systemic Risk

If a company shrugs off outages as “normal,” run diagnostics immediately. Those “isolated incidents” often expose:

• Band-Aid infrastructure that can’t scale
• Disaster recovery plans that only exist on paper
• Technical debt piling up like unpaid bills

How many angry customers is too many before valuation takes a hit?

2. The Architecture Truth Serum

When Collectors Universe’s TrueView service limped along while core systems crashed, it screamed architectural duct tape. As one CTO told me during a recent acquisition:

“Partial functionality often means Frankenstein systems – pieces cobbled together without real integration”

That fragmented tech stack becomes your problem at closing.

The Tech Due Diligence Stress Test

Code Quality: Beyond the Surface

Don’t just trust the sales deck. Get hands-on with:

• How errors get handled (or ignored)
• Automated safeguards when things go sideways
• Monitoring systems that actually alert humans

Scalability That Doesn’t Crumble

This simple test could save millions:


// Simulate real-world pressure
{
"concurrent_users": 5000, // Typical peak load
"duration": "1h", // Minimum stress test window
"failure_threshold": "0.1%" // Any higher spells trouble
}


Quantifying the Unseen Risks

Numbers don’t lie when assessing tech reliability:

• How fast do they actually recover? (MTTR tells all)
• Dependency maps showing single points of failure
• Post-mortem reports revealing root causes – or blame games

One client discovered 87% of services depended on one ancient server. Deal terms changed overnight.

3 Non-Negotiables for Savvy Acquirers

1. Demand the data: Three years of uptime logs don’t lie
2. Grill the ops team: “Walk me through your last midnight crisis” reveals more than any audit
3. Test failovers live: Seriously – assume nothing works until you see it

Turning Tech Red Flags Into Green Lights

The Collectors Universe outage shows in brutal clarity: When systems fail, customer trust evaporates. Smart acquirers now:

• Price tech risks into the offer (that 20% discount could save your ROI)
• Tie payouts to reliability milestones (your future self will thank you)
• Plan immediate system triage post-close (no more kicking the can)

Here’s the truth no one says aloud: A company’s darkest tech moments reveal more about its worth than years of steady performance. What will your target’s outage history say about your deal?

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