How the SDB Fiasco Reveals 3 Critical Tech Due Diligence Risks in M&A Deals

How the SDB Vault Blunder Exposes 3 Deadly Tech Due Diligence Gaps in M&A

Imagine drilling into the wrong bank vault because someone transposed two numbers. That’s exactly what happened in the SDB fiasco – a $200k mistake revealing how tiny tech gaps can torpedo million-dollar deals. As someone who’s crawled through codebases during 50+ acquisitions, I’ve seen how acquirers overlook the same three risks that doomed that bank vault.

Why That Bank Drill Should Keep Tech Buyers Up at Night

Let’s break down the vault incident like we would a failed software system:

• A clerk typed “3544” instead of “3554” – no system double-checked it
• Nobody tracked who approved the drill order
• External lawyers bypassed security like rogue API keys

“M&A disasters don’t start with explosions – they begin with silent validation failures.” (Heard from a jaded tech auditor after a $17m write-down)

The 3 Silent Killers of Tech Deals

1. The Ghost in the Machine: When Code Doesn’t Double-Check

The bank’s missing number check mirrors code that trusts user input blindly. Like this API endpoint from a fintech we assessed:

// Disaster waiting to happen
app.get('/admin/deleteUser', (req, res) => {
const userId = req.query.id; // No validation!
database.deleteUser(userId); // Poof - data gone
});

We found nearly identical code in a payment processor acquisition. Their “fix”? Adding simple format checks:

// Safety first
const isValidId = /^\d{4}$/.test(userId); // 4-digit lock
if (!isValidId) throw new Error('Invalid ID - abort!');

2. The Scalability Mirage: Systems That Crack Under Load

The bank’s manual verification worked… until it didn’t. In tech deals, we hunt for:

• Error rates that spike during sales peaks
• Missing safety nets for critical operations
• Monitoring gaps letting failures go unnoticed

One e-commerce platform failed 14% of checkout requests during holiday load tests. That discovery renegotiated the price by 22%.

3. The Partner Trap: Third-Party Access Gone Rogue

Those attorneys walking into the vault? They’re like poorly secured API integrations we find:

• Legacy partner keys with full database access
• Zero IP restrictions on admin endpoints
• Shared credentials in client-side code

During a healthtech acquisition, we found ambulance-tracking APIs with no access controls. The solution?

// Locking it down
oauth2.authorize({
scope: ['read:locations'], // Minimum access
ipWhitelist: ['10.0.1.0/24'] // Office-only
});

Your Tech Due Diligence Battle Plan

After reviewing systems worth billions, here’s our field-tested checklist:

Code Autopsy Essentials

• Search for unfiltered inputs (the vault number flaw)
• Audit logs for destructive actions (who pressed “drill”?)
• Tests for transposition errors (3544 vs 3554 matters!)

Stress Test Reality Checks

• Simulate Black Friday traffic spikes
• Track how errors accumulate under load
• Verify auto-rollback capabilities

Third-Party Minefield Navigation

• Inventory all external access points
• Validate integration security certs
• Map data flows across borders

From Red Flags to Green Lights

During a recent $400M acquisition, here’s how we transformed risks:

The deal closed with zero post-acquisition fire drills.

Don’t Drill Into the Wrong Tech Stack

The SDB disaster wasn’t about bad people – it was about missing safeguards. Smart acquirers now treat tech due diligence like bank security:

• Assume inputs are dangerous until proven safe
• Stress-test systems at breaking point
• Audit third-party access like vault visitors

Because in M&A tech deals, what you don’t validate can vaporize your ROI faster than an angle grinder through steel.

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