In the majority of M&A deals, due diligence is a one-way process. The buyer scrutinizes the seller. The seller rarely consider to examine the buyer with the same level of scrutiny. Let’s begin with three cautionary tales from some of the world’s largest tech companies:
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- TSB & Sabadell (2018): TSB positioned its core banking transition as fully underway and under control. In reality, its systems were not ready for prime time. When Sabadell took over and executed the migration, the flaws surfaced fast, customers were locked out, some saw others’ accounts, and the fallout was public, chaotic, and costly. Regulators stepped in, £176 million in damage was absorbed, and the CEO resigned. What looked like a clean transition masked years of unaddressed technical debt and insufficient diligence on the seller’s part.¹
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- Microsoft & Nokia (2013): Nokia assured Microsoft it was ready to align and integrate. It wasn’t. Beneath the surface, the technology environment was rigid, compartmentalized, and misaligned with Microsoft’s product vision. The result? Integration failed, the user experience suffered, and Microsoft wrote off the $7 billion deal while laying off 15,000 employees. This wasn’t about ambition, it was about Nokia overpromising and under-disclosing its tech limitations.²
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- Microsoft & Danger Inc. (2008): Danger was sold to Microsoft with the promise of growing more quickly in mobile. But what the seller failed to evaluate was whether the buyer was truly ready to manage mission-critical infrastructure. Microsoft’s back end was not robust enough to carry Danger’s user base—without redundancy, documentation, and operational depth. When the system crashed, millions lost their information. It wasn’t merely Microsoft’s reputation that was tarnished. Danger’s devoted customer base felt deserted, and its brand was collateral damage. If the seller had conducted its own due diligence—on technical capability, post-close strategy, and operating fit—the warning flags could have been raised earlier.³
These are not merely tales of grand ambitions. They are cautionary tales. Each might have been mitigated, or even averted altogether, had the seller performed even minimal due diligence on the buyer’s technical preparedness and strategic fit.
The Problem: Sellers Still Don’t Vet Buyers
For years, the rule in M&A has been this: the buyer examines the seller, and the seller only looks at how they can be their best self. But that breaks down in big-money deals in which brand value, product maturity, and customer trust hang in the balance. If you are selling a company that relies on great technology, close teams, or engaged users, you want to know who’s coming after them.
But most founders approach reverse diligence as a formality. There is a perception that because the buyer has the money, their integrity need not be questioned. That attitude has costs. Sellers transfer high-value IP, talent, and products to firms that lack the systems, structure, or dedication to support them. The outcome is usually broken promises, shattered teams, and integration maze.
This isn’t paranoia. It’s pattern recognition. According to research, 70% of M&A integrations don’t meet their goals.⁴ And in more than half of those instances, the underlying cause is failed technology or operational alignment, problems that would’ve been detected with more diligence in the beginning.
But that’s changing — and for good reason.
The Real Cost of Skipping Reverse Diligence
Sellers generally take for granted that it’s the buyer who has to perform due diligence. But avoiding reverse diligence can be costly, particularly when it relates to maintaining long-term brand worth and stakeholder relationships.
If the buyer has a history of poor integration, customer experience typically suffers after closing. Alas, customers don’t usually distinguish between old and new ownership, brand harm still reflects back on the seller. Likewise, employee morale can plummet if the buyer doesn’t have clear plans or cultural fit, threatening attrition and operational losses.
There’s also financial risk: milestone payments or earnouts might be contingent on quality of execution that’s beyond the seller’s control.
Reverse diligence verifies the buyer’s post-close preparedness, reputation with acquired firms, and integration discipline. It makes sure that value created over years doesn’t get destroyed within months.
Briefly: sellers need to evaluate the buyer as rigorously as the buyer evaluates sellers—because the deal aftermath lasts much longer than a signature.
What to Look For In Reverse Due Diligence?
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- Technology and Operating Model Compatibility: Assess the buyer’s digital infrastructure, IT maturity, and integration strategy. This impacts not only systems, but product roadmap, scalability, and long-term sustainability post-close.
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- Post-Transaction Value Realization History: Evaluate the buyer’s track record of delivering synergies promised by considering the history of past purchases. Interview previous leaders in the portfolio to know about integration results, leadership retention rates, and operational implementation.
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- Capital Allocation Discipline: Ask for transparency into how the buyer has in the past financed post-close projects — ranging from technology enhancements to talent retention. Ensure that value creation is not only modeled but also funded.
Why You Need Technical Experts; Despite Having Best Brains in Your Team
Even a great CTO or engineering leader can’t find all the problems in a buyer’s system, if they haven’t done diligence beyond their own firm, anyway. Technical advisors with experience evaluating dozens of deals in multiple industries, sizes, and architectures are able to do it. They know what to seek out, are able to identify latent technical debt, alert questionable security controls, detect codebase brittleness, and challenge overly boastful infrastructure claims.
It’s not about replacing your internal team, it’s about supporting them. Technical diligence advisors understand what breaks after an acquisition. They’ve witnessed hasty migrations that brought engineering teams to a halt for quarters. They’ve seen integration plans disintegrate because nobody tested how the platforms would actually communicate with one another. They can inform you, with certainty, whether your product will scale, stall, or falter in someone else’s hands. That’s information you can’t afford to miss.
And this isn’t risk protection; it’s value protection. A seller who goes into negotiation with knowledge of where the buyer’s gaps are can not only negotiate better terms, but also safeguard their product, people, and post-close execution.
Conclusion: When You Sell, You Don’t Just Exit — You Transfer Everything You Built
Reverse due diligence all about preparation. You can’t revisit the choice of your buyer when the ink on the contract runs dry. Which is to do the hard stuff beforehand, fire good questions at people, provoke glossy answers with tougher ones, and check stories out before faith is converted to remorse.
You’ve invested decades in your business. Don’t give it away sight unseen. Assess the buyer the way they’re assessing you, with penetrating attention, disciplined analysis, and expert guidance where it matters. Because when it comes to M&A, exits are not about figures, they’re about change. And the cleaner the change, the more powerful the legacy you create.
