Why Technical Due Diligence Matters
According to Bain & Company, 70% of M&A deals fail to deliver expected value. Post-acquisition technology integration is among the top three reasons. A thorough technical assessment can save millions in unexpected remediation costs.
The Eight Assessment Domains
1. Architecture and System Design
Assess system decomposition, data architecture, scalability (can it handle 10x load?), and cloud architecture (IaC, reproducible environments). Red flags: no architecture documentation, single points of failure, hardcoded credentials in source code.
2. Code Quality and Technical Debt
McKinsey estimates technical debt adds 20-40% to feature cost in heavily indebted codebases. Run static analysis (SonarQube), check test coverage, audit dependency health, review PR practices.
| Metric | Green | Yellow | Red |
|---|---|---|---|
| Test coverage | > 70% | 40-70% | < 40% |
| Critical CVEs | 0 | 1-5 | > 5 |
| Code duplication | < 3% | 3-10% | > 10% |
| Dependency freshness | < 1 year behind | 1-3 years | > 3 years |
| PR review rate | > 90% | 60-90% | < 60% |
3. Infrastructure and Operations
Check IaC coverage, monitoring/alerting stack, incident history (last 12 months), DR plan (tested recently?), and cloud cost efficiency.
4. Security Posture
Review authentication, data encryption, vulnerability management, and compliance. Red flags: no pen test ever, secrets in source code, no audit logging, all engineers with production write access.
5. Team and Engineering Culture
Identify key person dependencies, retention risk, engineering practices (CI/CD, code review, retros), and documentation quality.
6. Data and Intellectual Property
Audit data ownership, open-source licence compliance (GPL/AGPL in proprietary code is deal-critical), third-party dependencies, and patent landscape.
7. Scalability and Growth Readiness
Assess current capacity headroom (over 70% utilisation is risky), identify the first component to fail under 10x load, and evaluate multi-region readiness.
8. Integration Complexity
Evaluate API surface (REST/GraphQL with OpenAPI?), identity integration (custom auth = 2-4 months work), and data integration (schema compatibility, migration complexity).
The Due Diligence Report
- Executive summary with overall risk assessment (green/yellow/red) and remediation cost estimates
- Domain scores — which are deal risks vs post-acquisition items
- Deal-critical findings that should influence price or go/no-go
- 100-day prioritised remediation roadmap
- Cost estimates for technical debt remediation and integration
Our technical due diligence service provides comprehensive assessments within 2-4 weeks for private equity firms and strategic acquirers across Europe. Contact us to discuss your upcoming transaction.
