Why Technical Due Diligence is Mission Critical in Your Next M&A Deal

This is a guest post contributed by Mushfiq Sarker, CEO of WebAcquisition.com

A 40-year study covering over 40,000 deals showed that 70–75% of M&A transactions fail to meet expectations (source). Most people blame this on poor financial analysis or post-acquisition execution. 

But from our experience working on 1,000+ online business transactions, a major contributor is often ignored: lack of technical due diligence. Financials tell you where the business has been. Technical due diligence (TDD) tells you if it can sustain and scale. 

We've reviewed FBA brands with profitable margins but poor ad campaign structure, SaaS tools with outdated architecture, YouTube channels dependent on short-lived virality, and content sites crushed by Google updates. These risks don’t show up in the P&L and if they do there is a lagging effect that the new buyer then takes on post-close.

What follows is a breakdown of how we evaluate technical diligence and why skipping this step can result in overpaying, or worse, buying a liability, not an asset. Let’s get into it!

What is Technical Due Diligence

Technical due diligence is the process of assessing the infrastructure, software, systems, tools, and marketing stack that run the day-to-day operations of a business. This includes:

• The codebase (if applicable), integrations, plugins, or themes

• Revenue-driving platforms (e.g., Amazon Seller Central, Shopify, WordPress, YouTube Studio)

• Ad campaigns and analytics systems

• CRM and automation tools (e.g., Klaviyo, Beehiiv, Google Tag Manager)

• Intellectual property like software code, videos, or ghostwritten content

• Data privacy practices and compliance with terms of service

• Internal workflows, whether outsourced or in-house

  
  

For example, in a recent SaaS due diligence project, we flagged that the seller had issued custom invoices with inconsistent naming across clients, making revenue attribution nearly impossible. The P&L would have shown these as straightforward line items, but in reality, it would not show if it’s recurring, which clients are the top payers, are clients renewing, etc.

As another example, P&Ls show revenue looking backwards. But hindsight is always 20/20. We can us TDD to see potentially what the next 3-6 months’ revenue may look like based on traffic trends, paid advertising setup, and more. This is because of the natural lagging effect from P&L to actual operations that happens in online businesses. 

TDD is a powerful analysis that can show the true colors of the business.

7 Key Pillars of Technical Due Diligence

1. Software & Systems Architecture: How fragile is the platform? Are there hard-coded elements or custom modules that only one person knows how to maintain?

2. Code Quality, Maintainability, Technical Debt: Especially for SaaS, but also relevant in no-code or low-code setups.

3. Infrastructure, Hosting, and Platform Accounts: Includes server reliability, uptime risk, and dependency on external platforms.

4. Digital Marketing Stack: Are campaigns set up to scale or are they duct-taped together?

5. Analytics & Conversion Tracking: Can you trust the numbers? Is attribution data complete?

6. Cybersecurity & Data Handling: Especially important in email-driven businesses or those handling customer data.

7. IP Ownership & Contracting: In KDP and YouTube deals, confirming ghostwriter rights or contractor agreements is a must.

   
   

In one Amazon FBA deal, revenue appeared strong and margins were stable. But during the technical review, we found the business was running a large number of ad campaigns with no clear strategy or organization. Ads were overlapping, budgets weren’t managed well, and there was no system in place to control costs. 

As a result, advertising spend was climbing faster than revenue, eating into profitability. This issue wasn’t obvious in the financials, but it had a direct impact on the long-term sustainability of the business post-buyer takeover.

Example Technical Due Diligence Issues We Review

We’ve flagged dozens of critical issues during past reviews. Here are just a few:

• Content Sites: 75% organic traffic loss after 4 Google updates due to low-quality internal linking and poor First Contentful Paint on recipe pagesContent Site DD Reports….

• YouTube Channels: Channels monetized entirely on short-lived, news-style content with no long-tail library value and ad revenue dependent on 1–2 viral videos

• Amazon KDP Accounts: Ghostwritten e-books with no clear writer contracts, low-cost teams without continuity planning, and single-character universes not documented for future writing

• eCommerce Stores: Gross profit inflated due to poorly tracked COGS, missing fulfillment and storage fees, and understated operational costs

• Newsletters: Email lists with tens of thousands of imported subscribers but no clarity on opt-in source, spiking unsubscribe rates, and open rate metrics inflated by email service provider-triggered bot clicks.

  
  

Any one of these can mean a mispriced deal or a post-close revenue drop. In TDD, you should catch these yellow to red flags which then allow you to retrade the valuation being paid, or back out of the deal.

Why Technical Due Diligence is Mission Critical

Finding Hidden Risks & Liabilities

Most of the red flags we uncover aren’t found in a P&L or data room. Technical reviews surface issues like:

• Suspended or at-risk Amazon Seller Accounts

• Disorganized campaign structures with 100s of auto-PPC tests left running

• Outdated CMS plugins or abandoned WordPress themes

• Metrics dashboards showing revenue, but with attribution completely broken

• CRM setups with no segmentation, no automations, or unverified deliverability

  
  

Accurately Evaluating Core Assets & Strategic Value

Most online businesses are valued based on SDE (seller discretionary earnings) and a multiple. But technical health often determines whether that multiple holds up.

In newsletter and email-first acquisitions, revenue may depend entirely on list size and open rate. But if those subscribers were imported, or churn is increasing, that revenue won’t last.

Same with FBA brands where ad costs have doubled, and campaign inefficiency is hiding behind top-line growth.

Informing Valuation, Deal Structure, and Negotiation

When we find major tech gaps, our clients often renegotiate. These findings directly affect how the deal is structured and what protections are built into the agreement. Examples of how we’ve applied TDD results to deals include:

• Price Adjustments: Reduced valuation due to platform risk, degraded ad performance, or content devaluation

• Earnouts: Tying part of the payout to performance metrics like traffic recovery, ad ROAS (return on ad spend), or subscriber retention

• Holdbacks: Withholding a portion of the purchase price for 60–120 days to verify post-acquisition performance

• Seller Financing: Offering a portion of the price as a loan with repayment tied to business continuity

• Transition Conditions: Making part of the payout contingent on specific operational tasks like publishing X number of KDP books or running a fixed set of ad campaigns for continuity

  
  

In several FBA acquisitions, we’ve structured deals with 70 percent of the purchase price paid upfront, and the remaining 30 percent tied to maintaining ad performance or review scores for the top-selling SKUs (stock keeping units) post-transfer. This creates alignment, reduces buyer risk, and ensures that sellers remain accountable for operational quality during the transition.

What Goes Into Technical Due Diligence

Here's our standard checklist when reviewing an online business:

• Revenue Trends: We analyze revenue over the trailing 3, 6, and 12 months to understand growth or decline. Sudden spikes or drops help us identify seasonality, one-time launches, or short-term ad spend boosts. These trends often dictate valuation accuracy.

• Platform Health: Platform lock-in risk and terms of service compliance.

• Traffic Audits: Attribution checks, tracking script review, UTM consistency.

• Ad Campaign Review: Structure, ROAS, efficiency, keyword logic.

• Tech Stack Review: WordPress themes, plugins, backend stack.

• Third-Party Tools: Software subscriptions, over-reliance, cost bloat.

• Automation Systems: Klaviyo, ActiveCampaign, Zapier logic, CRM integrations.

• SEO & Content: Crawl data, thin content, schema, spammy backlinks.

• Analytics: GA4 setup, Tag Manager, funnel tracking, dashboard logic.

• IP & Team: Ownership of all creative assets, documented SOPs, and continuity plans.

• Domain History: We check if the domain has changed hands often, was built on expired properties, or has a clean and consistent historical presence. Frequent changes, rebrands, or spammy history are signals we flag.

How To Integrate Technical Due Diligence into the M&A Lifecycle

Technical due diligence isn’t something to tack on at the end. It's most valuable when integrated early, informing not just whether you should close a deal, but how to structure it. The findings often influence pricing, earnouts, and transition planning. It also connects directly to legal and operational outcomes post-close. 

Here’s how we recommend folding it into your acquisition process:

• Early Initiation: Kick off TDD as soon as an LOI (letter of intent) is signed. Waiting until post-close to uncover tech risks leaves you with no leverage

• Use External Specialists: Most CPAs and attorneys don’t know what a broken GA4 setup looks like, or how to audit an Amazon ad account. Bring in operators or advisors with direct experience in the business model you’re buying

• Coordinate With Legal Counsel: TDD findings should inform reps and warranties, IP clauses, indemnification terms, and post-sale support agreements

• Scope Based on Risk Profile: Not every deal needs the same depth. A $5M SaaS tool with custom code warrants deeper technical scrutiny than a $200K content site running on WordPress

  
  

When done right, technical due diligence isn’t just a checklist. It’s a framework for making smarter decisions across the entire M&A lifecycle, from negotiation to integration.

WebAcquisition Can Help With Technical Due Diligence

We’ve reviewed 1,000+ online businesses across SaaS, FBA, YouTube, newsletter, KDP, and eCommerce. Technical due diligence isn’t optional anymore. It protects your downside and gives you visibility into how, and whether, the business will actually run once the wires hit.

Deals fall apart not because of missed revenue projections, but because buyers didn’t ask the right questions.

If you're making six or seven-figure acquisitions without reviewing the tech stack, you're not just taking a risk. You're rolling the dice blind.

Mushfiq Sarker is the CEO and head of due diligence at WebAcquisition.com, a boutique M&A firm representing buyers of online businesses. Mushfiq has been running a holding company since 2008 with over 220+ acquisitions to exits. He brings this wealth of knowledge to help buyers close on acquisitions with their best interest in mind.