Skip to main content
TAIARO
FREN
Back to home

Reading grid

Red flags of a PE Tech Due Diligence

Six recurring signals in pre-acquisition technical audits — general level, well known in TDD practice. Every mandate reveals variants specific to the target; this list is a starting point, not an exhaustive methodology.

  1. 1. Key Man Risk — critical dependency on one or two founding technical profiles, with no documentation or knowledge-transfer plan.
  2. 2. Unquantified technical debt — undocumented architecture, no automated tests, a rebuild that is necessary but absent from the financial plan shown to investors.
  3. 3. Unprovisioned Capex — rebuild or scale-up costs not included in the valuation — the gap gets negotiated into the acquisition price, not after signing.
  4. 4. Onerous vendor and cloud contracts — unfavourable exit clauses, vendor lock-in, data portability not guaranteed.
  5. 5. Untested scalability — business-plan growth assumptions not validated by real load tests on the existing architecture.
  6. 6. Unaudited third-party licenses — open-source or commercial components integrated with no compliance check and no up-to-date inventory.

This list supports a Tech Due Diligence mandate; it does not replace the audit itself, which reveals the signals specific to each target.