In any investment, merger, or acquisition, what you don’t know can hurt you—especially when it comes to a company’s technology. That’s why technical due diligence is a critical step in evaluating a potential partner or acquisition target. While revenue projections and customer metrics are important, understanding the health and scalability of the technology is equally essential. Technical due diligence reveals whether the product is truly built to last or held together by short-term fixes and outdated infrastructure.
Engaging professional technical due diligence services is a smart way to gain unbiased insight into a company’s tech stack, systems, and development practices. These experts know exactly where to look and what questions to ask. Whether you’re conducting due diligence internally or working with outside consultants, here are some common red flags that should raise concern during the evaluation process.
1. Poor Code Quality and Lack of Documentation
One of the first things a technical reviewer will examine is the quality of the codebase. Sloppy, inconsistent, or overly complex code can signal future maintenance issues and slow development velocity. Even if the product appears to work well now, poor code quality can make it difficult to scale, troubleshoot, or onboard new developers. A lack of proper documentation only compounds the issue, making the system overly dependent on a few individuals’ institutional knowledge.
2. Excessive Technical Debt
All companies carry some level of technical debt, but excessive or unmanaged debt is a serious risk. Quick fixes, workarounds, and legacy systems might have helped the company move fast in its early days, but they can severely limit future growth. If a significant portion of the product needs to be rewritten or refactored just to meet modern standards, it could delay roadmaps, increase costs, or cause internal friction.
3. Insecure or Non-Compliant Systems
Security and compliance are non-negotiable, especially in industries handling sensitive data like healthcare, finance, or education. A lack of basic security measures—such as data encryption, access controls, or secure authentication protocols—is a glaring red flag. Non-compliance with industry regulations (like HIPAA, SOC 2, or GDPR) can expose you to legal risk and damage your reputation before you even get started.
4. Weak DevOps and Deployment Practices
An outdated or manual deployment process can slow down development cycles and increase the chance of human error. During technical due diligence, it’s important to evaluate how the team manages updates, testing, and rollbacks. A lack of automated testing or continuous integration systems suggests a reactive, rather than proactive, development culture.
5. Over-Reliance on a Few Key Individuals
Finally, if the system’s functionality depends heavily on one or two developers, that’s a major red flag. Team resiliency matters—especially post-acquisition. The loss of one key person shouldn’t threaten the company’s ability to operate or innovate.
Technical due diligence is about more than checking boxes—it’s about understanding whether a company’s technology can support its vision. Identifying these red flags early gives you the clarity to walk away or negotiate terms with confidence.
