Why Technical Debt Should Be on Every M&A Diligence Checklist
When private equity firms evaluate a software acquisition, they often focus diligence on financial, legal, and commercial aspects. But one of the biggest threats to post-close performance rarely shows up in the data room: technical debt.
Technical debt is the accumulation of shortcuts, fragile architecture, and deferred maintenance that builds up over time in a software product. To an investor, a target company’s engineering team may look fast-moving and efficient. But speed today doesn’t always translate into scalability tomorrow. Without careful review, the hidden cost of technical debt can become a major source of value erosion after the deal closes.
Why Technical Debt Matters
Technical debt impacts the very areas private equity firms and portfolio company leaders care most about:
Slower delivery post-close. Roadmaps stall when fragile systems or outdated frameworks can’t scale with growth. Features take longer to ship, frustrating customers and eroding competitive advantage.
Unexpected cost escalation. Fixing deferred maintenance or re-architecting under pressure almost always costs more than addressing the problem early. Budgets meant for innovation get consumed by remediation.
Key-person risk. Organizations become dangerously reliant on a few engineers who know how to keep brittle systems afloat. If they leave, knowledge gaps can cripple operations.
Cloud costs and infrastructure waste. Poorly designed systems often lead to runaway cloud costs and inefficient cloud infrastructure. These expenses can grow silently until they impact EBITDA.
Real-World Impact
Consider a SaaS acquisition where the thesis depended on accelerating product releases to capture market share. Post-close, the engineering team slowed to a crawl because the platform’s architecture couldn’t support the pace of change. What looked like a strong engineering capability in diligence turned into months of costly rework and a delayed growth plan.
A Better Approach to Technical Diligence
At Kickdrum, we believe technical diligence isn’t about finding flaws. Rather, it’s about providing a clear, comprehensive picture so decision-makers can plan with confidence. Our team of senior engineering leaders goes beyond checklist reviews to assess:
Software architecture, performance, and scalability
Code quality, complexity, and maintainability
Cloud infrastructure design and cost efficiency
Engineering practices, velocity, and organizational resilience
AI threats and potential
This approach helps operating partners and executives see not only the risks but also the opportunities. With the right insights, investors can negotiate from a position of strength and plan post-close engineering investments that accelerate value creation.
Protecting Value Post-Close
Identifying technical debt before close is only half the equation. Kickdrum also helps portfolio companies design mitigation strategies that prioritize fixes, manage budget impact, and enable growth. By embedding experienced technologists, we help management teams modernize platforms, contain cloud costs, and build engineering organizations capable of delivering at scale.
The Bottom Line
In acquisitions, hidden technical debt is one of the most overlooked sources of post-close pain. By incorporating a deeper level of technical due diligence, private equity firms and portfolio executives can avoid costly surprises, protect enterprise value, and set their teams up for long-term success.
