INSIGHT

Why Technology Due Diligence Has Become a Deal-Breaker in M&A

Craig Hamm • November 11, 2026

Services: Due Diligence Services

---

Buyers used to treat technology review as a checklist item near the end of a transaction. That approach doesn’t work anymore. Today, a company’s technology stack can decide whether a deal moves forward, gets repriced, or falls apart entirely.  

Outdated systems, unpatched vulnerabilities, and poor data practices carry real financial consequences, and buyers now dig into them with the same intensity they apply to financial statements. This shift means sellers need to understand what technology due diligence covers and why it carries so much weight in today’s deals. 

Technology Now Touches Every Part of a Deal 

Technology used to sit in its own silo during due diligence in M&A. Now it connects directly to financial performance, operational risk, and even valuation. A company’s software licensing terms can affect whether an acquirer can use the systems it’s buying. A weak cybersecurity posture can create liabilities that arise months after closing. Cloud infrastructure costs can eat into projected margins if nobody accounted for them properly. 

Buyers ask harder questions because the stakes have risen. A breach discovered after closing costs far more than one caught during diligence. Integration problems that trace back to incompatible systems can delay synergies buyers counted on when they built their deal model. None of this is abstract risk anymore. It shows up in purchase price adjustments, escrow terms, and sometimes in a buyer walking away. 

What Buyers Are Looking For 

A thorough technology review goes well beyond checking whether the software works. Buyers want to understand the architecture behind a company’s systems, including how much of it depends on custom code that only a few people understand. They look at technical debt, meaning the shortcuts and workarounds that accumulate over years and slow down future development. 

Cybersecurity gets particular attention. Buyers ask about past incidents, patch management, access controls, and whether the company follows any recognized security framework. They also examine data practices, since privacy regulations differ by jurisdiction and a company operating across borders needs to comply with each one.  

Software licensing matters too. A company running on licenses that don’t transfer cleanly in an acquisition can create expensive surprises. Integration planning has become part of the review as well. Buyers want to know how easily target systems will connect with their own, and whether key technical staff plan to stay through the transition. 

The Red Flags That Slow or Kill Deals 

Certain findings consistently create problems at the negotiating table. The due diligence red flags in tech deals you should keep an eye out for include:

• Outdated infrastructure that requires significant investment to modernize changes the buyer’s cost calculations.  
• Poor documentation of code and systems raises questions about how much institutional knowledge lives only in the heads of a few employees who might leave after the sale. 
• Unresolved security incidents, especially ones that were never disclosed, damage trust between the parties and can trigger walk-away clauses.  
• Compliance gaps, particularly around data privacy laws, expose the buyer to regulatory risk they didn’t sign up for.  
• Dependency on a single vendor or a single engineer for critical systems signals fragility that buyers price into their offer, if they don’t abandon the deal altogether. 

None of these issues automatically end a transaction. But they almost always change the terms, whether through a lower purchase price, an extended escrow, or specific indemnification language written to cover the risk. 

How Sellers Can Prepare Before Diligence Starts 

Sellers who address technology issues and other key due diligence findings early tend to fare better once buyers start asking questions. Cleaning up documentation, patching known vulnerabilities, and organizing licensing records before a deal process begins removes friction later. Companies that conduct their own technology assessment ahead of a sale often catch problems while they still have time to fix them, rather than explaining them under pressure during negotiations. 

Clear records of security practices, incident history, and data handling policies also speed up the process. Buyers move faster when the information they need is organized and available, and a smoother process tends to build the kind of confidence that supports a stronger valuation. 

Working with BPM 

Technology due diligence sits at the intersection of finance, operations, and risk, which is exactly why it deserves the same rigor buyers apply to financial statements. BPM’s Due Diligence Services look at infrastructure, data practices, and integration risk alongside the financial and operational picture, so clients get a complete view of what they’re buying or selling before terms get locked in.

Whether you’re preparing to sell and want to address issues before they surface, or you’re evaluating an acquisition and need clarity on what you’re taking on, a conversation early in the process makes a difference. To talk through your deal and what a thorough technology review could mean for your outcome, contact us.