During an acquisition, private equity investment, or major enterprise vendor review, technical due diligence examines the real state of your software. Acquirers look past sales presentations to inspect code repositories, third-party libraries, architecture bottlenecks, and engineering workflows for hidden risks that could reduce company valuation or require costly fixes post-transaction.
How the Due Diligence Process Works
A typical technical evaluation takes between two and four weeks. Evaluators usually follow a structured four-stage process:
- Data room and document review: The buyer requests architectural diagrams, infrastructure inventories, SOC 2 or ISO reports, incident logs, disaster recovery runbooks, and team organizational charts.
- Automated static analysis and scanning: Evaluators run automated scans over repository mirrors to index open-source licenses, identify unpatched security vulnerabilities (CVEs), detect leaked API credentials in git history, and calculate cyclomatic code complexity.
- Technical leadership interviews: Evaluators interview CTOs, lead architects, and engineering managers about system bottlenecks, release cadences, key-person dependencies, and cloud spending efficiency.
- Deep-dive code walkthroughs: Auditors inspect specific pull requests, core domain logic modules, data access patterns, and database migration histories to assess engineering discipline.
The Core Audit Dimensions
Auditors evaluate technical assets across five distinct categories to determine operational resilience and future maintenance liabilities.
1. Code Quality and Maintainability
Evaluators inspect source code to estimate future engineering velocity and maintenance expenses. They want to know whether new hires can quickly understand and safely modify the system.
- Test coverage and quality: Auditors check whether test suites validate core domain rules and integration boundaries or rely on shallow unit mocks. A working suite running in CI gives buyers confidence that changes will not trigger silent production regressions.
- Framework and runtime currency: Running on supported versions (such as .NET 10 or modern LTS Node) shows disciplined maintenance. Systems stranded on end-of-life runtimes represent immediate technical debt that acquirers must fund after closing.
- Dead code and abandoned modules: Repositories containing commented-out blocks, abandoned feature flags, and obsolete microservices indicate lax development discipline.
- Code churn and hotspots: High churn concentrated in oversized classes reveals architectural coupling where multiple developers constantly collide on the same files.
2. Open-Source Licensing and the Software Bill of Materials (SBOM)
Third-party libraries represent significant legal and security risk during an acquisition. Legal teams pay close attention to intellectual property contamination.
| Audit Item | What Auditors Look For | Red Flag |
|---|---|---|
| Copyleft Licenses | Permissive licenses (MIT, Apache 2.0, BSD) across direct and transitive dependencies | GPL-3.0 or AGPL components linked into proprietary commercial code |
| Vulnerability Backlog | Automated dependency updates (Dependabot/Renovate) and fast patch cycles | High-severity unpatched CVEs older than 60 days in production containers |
| SBOM Completeness | Machine-readable CycloneDX or SPDX bill of materials generated per release | Unversioned third-party binaries committed directly to git repositories |
| Secrets in History | Automated secret scanners and managed identities (Azure Key Vault, Workload Identity) | Live connection strings, API tokens, or private certificates in git commits |
| Database Schema | Version-controlled migrations (Flyway, EF Core migrations) | Manual schema edits applied directly to production databases without tracking |
3. Architecture, Scalability, and Single Points of Failure
Auditors review system topology against expected post-acquisition growth. A design that functions adequately for 1,000 users may fail if sales expansion triples traffic volume.
- Shared database bottlenecks: Multiple services reading and writing to the same database tables without clear service ownership create locking issues and tight deployment coupling.
- Synchronous call chains: Long chains of HTTP requests between internal services increase latency and make the entire flow vulnerable to the failure of any single component.
- Single points of failure: Background workers or cache nodes running on single unmonitored VMs without automatic failover or replica configurations.
- Stateful application tiers: Web services that store session state in local memory instead of distributed caches or databases, preventing horizontal scaling behind a load balancer.
4. Cloud Infrastructure, Hosting Costs, and Disaster Recovery
Evaluators audit cloud hosting environments for cost efficiency and disaster recovery preparedness.
- Infrastructure as Code (IaC): Environments defined declaratively with Terraform, Bicep, or ARM templates ensure infrastructure can be rebuilt reliably in a new subscription or region.
- Hosting unit economics: Cloud expenditure per active customer or per transaction. Evaluators check whether hosting costs grow linearly or scale down as user volume expands.
- Disaster recovery verification: Evaluators look for documented Recovery Point Objectives (RPO) and Recovery Time Objectives (RTO), backed by verified database restore tests rather than unverified backup files.
5. Team Ownership, Governance, and Key-Person Risk
Software value is directly linked to the engineering team. Auditors analyze git commit distribution to check how knowledge is spread across contributors.
A repository where 80% of core business logic commits come from a single developer presents substantial key-person risk. If that individual leaves after the acquisition, product continuity suffers. Documented Architecture Decision Records (ADRs), pull request review requirements, and shared code ownership demonstrate that the organization can build and support the product independently of any single engineer.
A 30-Day Preparation Plan for Your Codebase
Preparing your repositories before evaluators begin their review keeps the deal on schedule and avoids last-minute valuation debates.
Week 1: Supply Chain and Secrets Scan
Run CycloneDX or Trivy to produce an exact SBOM. Scan all git repositories with Gitleaks or TruffleHog to detect and invalidate any exposed tokens or credentials in commit histories.
Week 2: Architecture and Data Flow Maps
Assemble C4 context and container diagrams showing primary system boundaries, third-party integrations, and data storage locations. Document high-level data flows for customer and payment data.
Week 3: Repository Hygiene and Test Health
Delete stale git branches, archive abandoned experimental repositories, resolve flaky tests that fail intermittently in CI, and remove deprecated or dead code paths.
Week 4: Technical Debt and Operations Inventory
Document known technical limitations and maintenance backlogs alongside realistic remediation estimates. An honest, prioritized debt backlog signals engineering maturity to auditors.
Independent Pre-Investment Reviews
Conducting an internal technical health check before entering formal negotiations helps you identify and resolve architecture and licensing risks on your own schedule.
Our Software Architecture Assessment provides an objective review of codebase health, cloud infrastructure, security posture, and team delivery practices. We deliver actionable findings with prioritized remediation paths. See our sample assessment report to review the format and depth of an evaluation.