How Code Quality Audits Uncover Hidden Risks in M&A Tech Due Diligence

The Silent Deal-Killer in Tech Acquisitions

When tech companies merge, a thorough code check-up often reveals more than financials ever could. Let me show you why a target company’s code quality can make or break an M&A deal. Think of it like inspecting a vintage car before purchase – that shiny exterior might hide engine problems that could leave you stranded.

Why Bad Code Costs More Than Money

Last quarter, I reviewed an acquisition target whose documentation looked like it was written at 3 AM. Misspellings everywhere, half-finished API guides – it was the tech equivalent of finding water damage in a house inspection. The real surprises came later:

• Over 3,200 files with no version history
• APIs crashing with raw error messages in live environments
• Zero proof their systems could handle real traffic

This wasn’t just messy code – it was a warning sign of deeper operational issues.

What Smart Buyers Actually Check

1. Real Code Reviews – Not Just Box-Ticking

A meaningful audit goes beyond counting lines of code. We look for:

• How complex the logic really is
• Whether tests actually cover business risks
• Hidden security vulnerabilities in dependencies

# What Our Engineers Actually Check
if loading_time impacts user retention → investigate
if tests miss critical workflows → demand coverage
if security issues exist → pause negotiations

2. Scalability That’s Real – Not Just Slideware

One company promised “limitless growth.” When we simulated real user traffic? Their system choked at 40% capacity. Turns out their “scalable solution” was held together by digital duct tape.

3. Hidden Risks in Plain Sight

These often-overlooked issues cost buyers millions:

• Secret dependencies on soon-to-be-retired services
• Open-source licenses that could force code disclosure
• Missing audit trails for security incidents

4. The People Behind the Code

Great systems need great maintainers. We always check:

• How many engineers truly understand the core code
• Whether new hires can actually get up to speed
• If tech leaders have experience with growth challenges

Run Away From These Scenarios

After reviewing dozens of deals, these patterns signal trouble:

• Ghost Code: Critical features with no living owner
• Automation Theater: Fancy tools masking manual workarounds
• Knowledge Black Holes: No one knows why core systems were built this way

What Good Looks Like

These markers suggest you’ve found quality:

• Regular capacity testing with real-world scenarios
• Clear cost tracking for infrastructure decisions
• Detailed playbooks for system failures

Last month, we found a team whose systems automatically recovered from failures – like finding a vintage Porsche that still has its original maintenance records.

Your 4-Week Inspection Plan

Try this realistic timeline for tech due diligence:

1. Week 1: Map the real architecture
2. Week 2: Stress-test key systems
3. Week 3: Verify security and licenses
4. Week 4: Evaluate team capabilities

Look Beyond the Demo

In tech acquisitions, what you don’t see determines success. Comprehensive code audits and realistic testing reveal whether you’re buying a treasure or inheriting someone else’s tech debt. Remember – no one shows you the cracks in their foundation during the open house.

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