How Tech Due Diligence Can Make or Break Your M&A Deal: A Consultant’s Guide to Assessing Code Quality and Scalability

Why Tech Due Diligence Can’t Be an Afterthought

Let me be blunt: when acquiring a tech company, what you don’t know will hurt you. I’ve sat through too many boardroom moments where a “perfect deal” unraveled because nobody checked under the tech hood first. After 200+ technical assessments, I can confirm: code quality and system architecture directly impact whether your acquisition becomes a growth engine or a money pit.

The 4 Make-or-Break Checks We Always Run

1. Code Quality Audit

First things first: is the codebase maintainable or a house of cards? I look beyond pretty interfaces to assess:

• Test coverage (below 70% makes me nervous)
• Meaningful documentation – not just comments that repeat the code
• How much “quick fix” debt they’ve accumulated
• Whether code reviews are theater or actual quality control

Last year, we found a “unicorn” startup’s core features relied on untested legacy code. That discovery renegotiated their price tag by $12 million overnight.

2. Scalability Assessment

Here’s what keeps me up at night: companies that built for today but forgot tomorrow. I always check:

• Can their database handle 10x traffic?
• Are they prepared for vertical vs horizontal scaling?
• Cloud choices – strategic or just following trends?
• How systems perform when users flood in

3. Technology Risk Analysis

This is where deals often blow up post-signing. My team hunts for:

• Outdated libraries with security holes
• Open source licenses that could bite later
• Data handling that might trigger compliance audits
• Critical systems without backups or fallbacks

4. Team and Process Evaluation

Here’s what many buyers overlook: great tech with broken processes fails every time. I vet:

• Is their deployment process manual chaos?
• How they handle midnight system crashes
• Whether tribal knowledge is documented
• If engineering leaders can scale with growth

Practical Advice for Both Sides of the Table

Buyers: Protect Your Investment

• Never rush the tech review – 3 weeks minimum
• Demand repo access, not polished summaries
• Talk to mid-level engineers, not just executives
• Budget for hidden cleanup costs upfront

Sellers: Boost Your Valuation

• Don’t wait until the LOI arrives – clean house now
• Create a due diligence package engineers respect
• Fix obvious red flags before they become deal killers
• Prep your team for tough technical interviews

Real Costs of Cutting Corners

Let me share some war stories from failed diligence:

• $8M surprise cloud migration bills
• Year-long integration nightmares
• GDPR fines from overlooked data flows
• Top engineers quitting day one after acquisition

Where Smart Deals Get Smarter

Technical due diligence isn’t about nitpicking code – it’s about understanding what you’re really buying. When done right, it transforms risky bets into strategic wins. The best deals I’ve seen? Both sides treated tech review as collaboration, not confrontation. Because when engineers trust the process, acquisitions actually work.

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