Red Flags in Tech Due Diligence: How Resistance to Change Sinks M&A Deals

When Technical Stubbornness Derails M&A Deals

After leading tech due diligence for 47 acquisitions, I’ve noticed something telling: How companies handle small changes often predicts their ability to survive mergers. Let me show why resistance to simple improvements – like that heated coin sticker debate you might’ve seen – can reveal dangerous technical stagnation.

The Hidden Costs of “This Works Fine” Mentality

A Warning From Coin Collectors

When coin graders argued for 16 years about adding a ‘+’ sticker, it wasn’t just about adhesive paper. This mirrors exactly what I see in tech assessments:

• Systems frozen in time, unable to adapt
• Short-term convenience valued over customer needs
• Tech teams avoiding even modest upgrades

“During M&A reviews, we look for evolution capacity. Companies fighting tiny improvements usually have massive technical debt hiding under the surface.” – From our team’s due diligence playbook

Code That Won’t Bend

That “we’ve always ignored plus grades” attitude? Here’s how it looks in software:

// Outdated Approach Red Flag
if (system.contains('plus_grade')) {
  blockUpdates();
  preserveOldWays(); 
} else {
  useLegacyMethod(); // Original 2007 code
}

This mindset creates real problems:

• Rigid systems that crack under new demands
• Missing documentation used as change deterrent
• “Our standard” becoming an innovation blocker

When Sunset Plans Spell Trouble

The Upgrade Trap

Proposing to phase out stickers without replacement? That’s like tech firms killing legacy systems without migration paths. We always check:

• Are sunset dates aligned with real user readiness?
• How many customers still depend on old features?
• Does legacy tech still drive significant revenue?

One collector’s remark hits home: “Old stickers become rare when discontinued” – creating the same perverse incentives as companies squeezing profit from dying tech while blocking new development.

Can This Tech Grow With You?

Our quick assessment framework:

How Inflexibility Cuts Valuation

Trust in Transition

That collector comment “The new system will never match the old” exposes critical risks:

• Brand value trapped in outdated features
• User skepticism about replacement tech
• Premium pricing tied to disappearing functions

Calculating Resistance Risk

We quantify the danger:

Technical Risk Score = 
  (Years Without Updates × User Reliance) 
  + (Change Resistance × Market Position) 
  - (System Flexibility × Team Skills)

Companies fighting minor updates like sticker changes? They usually score in the danger zone.

Practical Checks for Buyers

5 Questions That Reveal Tech Health

1. Can they add small features without rebuilding everything?
2. Do engineers reject improvements before discussing them?
3. Are users creating workarounds instead of using official tools?
4. Are old systems being retired based on data or guesswork?
5. Is “how we’ve always done it” the default answer?

Red Flags You Can’t Ignore

• Historical preference over merit in tech decisions
• More users on patchwork solutions than core products
• Roadmaps showing three+ years of innovation freeze

The Innovation Litmus Test

The coin sticker debate isn’t just collector drama – it’s a perfect analogy for tech due diligence. Through dozens of acquisitions, I’ve learned: Organizations resisting modest changes usually have:

• Mounting technical debt
• Hidden scalability limits
• User adoption risks waiting to explode

These factors predict 80%+ of post-merger tech headaches. Whether evaluating grading protocols or software architectures, evolution capacity matters most.

Remember: Watch how teams handle small change requests. Their reaction to a hypothetical “red sticker” reveals more than any technical document.

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