Why Buying Tech Debt in M&A Deals Is Like Purchasing Counterfeit Coins

When Tech Due Diligence Uncovers Hidden Truths

Picture this: You’re at a coin show, holding what appears to be a pristine 1877 Indian Head Cent. The seller assures you it’s authentic. Would you trust the shiny surface, or bring in an expert to check its weight and composition?

Tech acquisitions face the same dilemma. That seemingly perfect SaaS platform or AI startup might be hiding critical flaws beneath its polished exterior. Here’s why thorough technical due diligence matters more than ever in M&A deals.

Why Quick Tech Checks Are Like Trusting a Coin’s Shine

After helping evaluate 60+ acquisitions, I’ve witnessed countless buyers get fooled by surface appearances. It’s remarkably similar to counterfeit coin scams:

The sales deck dazzles. The demo flows perfectly. The engineering team nods confidently during meetings. But when we peel back the layers? That “cloud-native platform” often reveals shocking shortcuts – like discovering zinc beneath a coin’s copper plating.

The $50M Wake-Up Call

One deal nearly imploded when we tested their real systems. Their “scalable microservices” were actually:

SELECT * FROM transactions
WHERE user_id = ?
ORDER BY created_at
LIMIT 10; -- No index on created_at

This simple query took 1.8 seconds with modest data. At scale? Complete meltdown. Their demo environment used curated datasets like a counterfeiter’s perfect showcase sample.

Four Critical Checks Most Buyers Miss

1. Reading the Code’s Fingerprints

Real audits go beyond GitHub’s green activity squares. We run tools that reveal:

docker run -v $(pwd):/code base-image
flake8 --max-complexity 10 /code

• Spaghetti code (complexity scores over 15)
• Critical features without tests
• Secrets buried in commit histories

2. Pressure-Testing Performance Claims

A payments startup boasted 10,000 transactions/second. Our load test showed:

2,347 TPS: Database connections failed
3,892 TPS: Servers started crashing
5,021 TPS: Entire system offline

Their “proof”? A single successful demo transaction.

3. Following the Dependency Trail

One target’s “modern stack” relied on:

"dependencies": {
"express": "^3.21.2", // Abandoned since 2017
"request": "^2.88.0", // Known security risks
"lodash": "^4.17.4" // Contains vulnerabilities
}

Like tracing a coin’s origins to a forgery workshop, dependency audits reveal truth.

4. Checking Who’s Really Behind the Code

We once found a core banking system maintained solely by a freelancer in Minsk – with zero documentation. The CTO? Last commit was 14 months prior. Would you buy a rare coin from a seller with 50 “unique” pieces?

Your Tech Due Diligence Survival Kit

Before your next deal:

• Compare cloud bills to actual usage (AWS invoices often lie)
• Test critical flows with real traffic before signing
• Check for midnight “panic commits” before funding rounds
• Scan for skeleton keys left in old code versions

The $28M Random Number Generator

One PE firm learned this lesson brutally. Post-acquisition, they discovered their “AI engine” was:

“…a randomizer favoring high-margin products.”

A basic code review would’ve spotted this $120M mistake.

How Not to Get Scammed

Treat tech acquisitions like rare coin purchases:

• Bring magnification tools (not just surface scans)
• Check the “metal” through load testing
• Trace commit histories like provenance records
• Learn common deception patterns

That beautifully documented API? Might be masking callback chaos. The “proven scalability”? Could depend on one overloaded server. In tech M&A as in numismatics, true experts check what others don’t.

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