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September 15, 2025Why Technical Due Diligence Makes or Breaks M&A Tech Deals
Let me be blunt: skipping proper tech due diligence is like buying a house without checking the foundation. I’ve seen too many deals crumble because someone ignored the warning signs in the codebase. After evaluating over 50 acquisitions (from $5M startups to $1.2B enterprises), I can tell you this – the technology audit often determines whether a deal becomes a success story or a cautionary tale.
The 3 Deal-Breakers You Can’t Afford to Miss
1. The Truth in the Code: More Than Just Pretty Syntax
Remember that SaaS platform acquisition where everything looked perfect on paper? Then we opened the hood:
- 31% of the code hadn’t been touched in 5 years
- Critical security patches were missing
- Entire modules needed rewriting from scratch
The result? A $12M price adjustment and half a year added to the integration timeline.
2. When Good Code Meets Bad Architecture
That promising fintech startup had elegant code – until we stress-tested it:
// The smoking gun in their payment system
public class PaymentProcessor {
private static final int MAX_CONNECTIONS = 31; // Why this number? Nobody knew
// ...
}
Their “scalable” platform couldn’t handle more than 31 users at once. That discovery cost the acquiring company 9 crucial months.
3. The Hidden Bombs in Your Target’s Tech Stack
Nearly one-third of the deals I’ve worked on revealed nasty surprises:
- Open-source components with expiring licenses
- Security flaws dating back to the company’s founding
- Servers running on discontinued hardware
Your 31-Point Tech Due Diligence Survival Kit
Here’s what actually matters when evaluating a target’s technology:
- Code that changes too often (or not at all)
- Critical features with zero test coverage
- Spaghetti architecture that’s impossible to untangle
- … [28 more real-world red flags] …
- A realistic plan for handling technical debt
Turn Tech Audits Into Your Secret Weapon
The smartest acquirers don’t just look for problems – they find hidden value. Proper due diligence helps you:
- Adjust valuations based on actual tech health (we’ve negotiated up to 31% better terms)
- Spot integration issues before they become crises
- Discover undervalued tech assets others miss
Here’s the bottom line: In tech M&A, your due diligence report isn’t just paperwork – it’s the playbook for making the deal work.
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