When you’re eyeing a company to buy or merge with, there’s a pretty standard playbook for what you dig into… financials, market share, leadership team… you get the idea. But one of the most overlooked yet mission-critical concerns? Their tech stack. Seriously. Tech due diligence can be just as important as any of those other concerns.

A target’s technology stack can hold hidden landmines or surprising gems that might make or break your deal months or years down the line. From cybersecurity gaps to aging infrastructure slowly crippling your prospects to scalable systems that can hypercharge future growth, understanding the tech side is critical to spotting risks and seizing opportunities.

Uncovering Hidden Risks and Opportunities Through Tech Due Diligence

A deep dive into a company’s tech setup can reveal both lurking dangers and untapped strengths. For example, outdated systems or technical debt might not just slow down integration but also rack up substantial upgrade costs. IT due diligence can uncover key risk areas and investment needs for your technology environment, specifically unsupported legacy systems and inadequate IT governance processes.

Outdated systems aren’t the only red flag. Misaligned tech stacks — where critical systems are incompatible with the acquiring company’s infrastructure — can mean higher integration costs and operational disruptions. If the company you’re evaluating uses niche or custom-built platforms, the long-term viability and scalability of these systems need to be questioned.

On the flip side, companies with a well-maintained, scalable tech stack present a valuable opportunity. A tech-forward organization can give you a competitive edge, especially if its systems align well with your own, or if they leverage innovative tools that are ripe for scaling. Technology due diligence can not only limit risk, but it can also help you identify and leverage possible synergies, opportunities to scale, and potential to automate. If those are there, you can drive meaningful growth post-acquisition… but only if you do your tech due diligence.

The Imperative of Cybersecurity Assessment

Cybersecurity is top of the list when assessing tech concerns in M&A transactions. Acquiring a company with weak cybersecurity defenses can expose the buyer to substantial risks, including data breaches, legal liabilities, and reputational damage. A study by Accenture found that “96% of CIOs have seen technology due diligence uncover major issues or opportunities in their M&A deals.”

NINETY SIX PERCENT. That is a staggering statistic that truly underscores just how important cybersecurity due diligence is for M&A deals.

More specifically, Deloitte lays out how “the cybersecurity risks related to an M&A transaction generally fall into three key areas: reputation, legal and regulatory, and financial.” For example, in 2017, Verizon reduced its acquisition offer for Yahoo by $350 million after uncovering data breaches that affected billions of user accounts.

Notably, smaller companies are particularly vulnerable, as they may lack the resources to maintain strong defenses. But their risks become your risks after the ink dries. A proactive evaluation of incident history, policies, and compliance frameworks is crucial to understanding what you’re inheriting.

It’s not just the threat of a breach… there’s a host of issues that can crop up if cyber defenses are porous, data management is shoddy, or real-time monitoring is weak. Your company’s brand can take a hit, you can open yourselves up to massive liabilities… both of which dramatically impact your current and future bottom lines. What’s more, inadequate tech due diligence can lead to non-compliance with data protection regulations, resulting in legal penalties to boot.

The Bottom Line of Tech Due Diligence

Tech due diligence isn’t just a box to check on your M&A to-do list — it’s a dealmaker (or dealbreaker). A deep dive into a target’s technology stack can uncover risks that might derail your plans or, better yet, hidden strengths that give your deal an edge. Whether it’s dodging costly compliance issues, identifying cybersecurity vulnerabilities before they become your problem, or spotting scalable systems that can drive growth, understanding the tech landscape is non-negotiable.

The truth is, you’re not just acquiring a company — you’re acquiring everything that keeps it running. Get the full picture, ask the hard questions, and make sure you’re not just buying into a great idea but also into a foundation that’ll last. Your future self — and your bottom line — will thank you.