How Technical Due Diligence Can Make or Break Your Next M&A Deal: A Consultant’s Guide

Tech acquisitions are exciting—until you discover the target company’s tech is held together with duct tape. As an M&A consultant who’s seen the good, bad, and ugly of tech stacks, I’ll show you why technical due diligence separates smart deals from expensive mistakes.

Why Technical Due Diligence Can’t Be an Afterthought

Here’s a truth I’ve learned from evaluating dozens of deals: the most expensive acquisitions often look cheapest at first glance. Technical due diligence isn’t just about ticking boxes—it’s your insurance against buying someone else’s problems. When done right, it reveals whether that shiny startup is actually built on solid ground.

The Code Quality Reality Check

Picture this: You acquire a company, then find their “production-ready” code has more holes than Swiss cheese. I once worked on a deal where we discovered:

• Zero documentation for core systems
• Critical features maintained by one developer (who’d already resigned)
• Test coverage so low it wasn’t even funny

The result? A 30% price reduction during negotiations.

What to demand before signing:

• Recent code audit reports (not just the pretty ones)
• Evidence of regular refactoring
• Team knowledge-sharing practices
• Architecture diagrams that actually match the code

Scalability: The Silent Deal Killer

Many companies perform beautifully—until they don’t. One SaaS acquisition looked perfect until we simulated just 2x their normal traffic. Suddenly, response times quadrupled, exposing database design flaws that would’ve cost millions to fix post-acquisition.

Scalability Tests That Matter

// Real-world stress test configuration we use
const loadTestConfig = {
users: '2x current peak',
duration: 'Until something breaks',
endpoints: ['/your/most/important/route']
};

Never skip these checks:

• How infrastructure handles traffic spikes
• Whether databases choke on simple queries
• If third-party services become bottlenecks
• Actual cloud costs at scale (not just the sticker price)

Hidden Tech Risks That Sink Deals

I’ll never forget the company using an abandoned open-source library with known security holes. The kicker? Their “vulnerability scan” report was two years old. The $500k remediation bill became our best negotiation tool.

Spotting Risks Before They Spot You

“In tech due diligence, what you don’t know will hurt your wallet.”

Our team checklist includes:

• Security patches (when was the last update?)
• License compliance (are you buying a lawsuit?)
• Dependency freshness (are key libraries still maintained?)
• Disaster recovery (or lack thereof)

A Consultant’s Playbook for Tech Due Diligence

After saving clients from countless bad deals, here’s my three-phase approach:

Phase 1: Infrastructure Autopsy

Cloud setup, deployment scripts, monitoring—we look for signs of adulthood versus cowboy coding. Infrastructure-as-code? Good. Manual server tweaks at 2 AM? Run.

Phase 2: Code Dissection

Beyond lines of code, we examine:

• Whether tests actually test anything
• How often “quick fixes” became permanent
• If the architecture can evolve without breaking

Phase 3: Team X-Ray

Because great tech needs great people. Red flags include:

• Only one person understands core systems
• No code review process
• Monthly releases labeled “agile”

War Stories: When Due Diligence Saved Millions

One “AI startup” we evaluated turned out to have humans manually processing data behind their API. Another relied on a soon-to-be-discontinued third-party service for 80% of their revenue. Both discoveries saved our clients from disastrous overpayments.

Turning Tech Scrutiny Into Deal Advantage

The best acquisitions treat technical due diligence as a flashlight, not just a safety net. It reveals both landmines and untapped potential in a target’s tech stack.

Remember: A company’s technology tells the truth about its real value—if you know how to listen. And in M&A, what you don’t know is always more expensive than what you do.

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