Part 2 of the blog series on 'Software Due Diligence: The Key To Successful M&A Deals focused on protecting software IP in software due diligence and effective strategies for the sell and buy sides.

Software due diligence increasingly involves companies with very diverse software landscapes – from systems that have evolved over decades to modern, fast-paced SaaS products. While these systems differ significantly in terms of technology and organization, the goal remains the same: a sustainable assessment of structural and technological future readiness.

In this third part  of the blog series, we explore what matters in modern software due diligence, how traditional and modern software solutions differ – and how tools like DETANGLE help enable sound, data-driven decisions.

1. Legacy Software – Stable but Often Outdated

Many software products examined during M&A or investor processes have been in use for years or even decades. Their characteristics include:

• A familiar and proven tech stack
• Predictable release cycles
• Well-documented processes

However, they also pose risks:

• Outdated technologies in maintenance-only mode
• Cloud operations typically just “lift-and-shift” without real scalability
• Monolithic architectures that are hard to extend or refactor
• Imminent loss of key knowledge due to retiring employees

What appears stable at first glance may, in fact, hinder innovation in the midterm.

2. Modern SaaS Products –
Agile but Often Immature

Young, fast-growing solutions – particularly in the SaaS or startup space – are built on:

• Modern technologies
• Lean, cross-functional teams
• Short development cycles
• High levels of automation

But this agility often comes at a price:

• Architectural decisions made under time pressure
• Technical debt, often undocumented or underestimated
• Gaps in documentation and knowledge transfer
• High dependency on key individuals (“knowledge islands”)

In these cases, due diligence must focus on scalability and long-term maintainability rather than just current capabilities.

3. Evolving Focus Areas in Software Due Diligence

Modern software due diligence looks beyond isolated code or infrastructure. It evaluates the entire development ecosystem — technically, organizationally, and procedurally. Key assessment areas include:

(1) Software Technology & Architectural Quality

• Modularity and extensibility of the architecture
• Cloud-native approaches vs. traditional migration
• Identification and estimation of technical debt
• Scalability in realistic growth scenarios (e.g., 10x or 100x users)

DETANGLE quantifies architectural qualities beyond traditional code analysis — providing deeper, actionable insights.

(2) Software Engineering & Process Maturity

• Test strategy (unit, integration, end-to-end)
• Test coverage and automation levels
• CI/CD maturity and review culture
• Traceability of features and bugs

For long-living systems like SaaS products, engineering maturity is crucial. DETANGLE combines architecture and process analysis and integrates test and CI/CD tool data.

(3) People & Knowledge Risks

• Identification of key individuals
• Knowledge distribution within the team
• Risks from undocumented expert knowledge
• Onboarding capability and team collaboration

A critical question: Can new developers be productively onboarded without deep dependencies on a few people?

(4) AI Aspects

More and more software solutions rely on AI capabilities – from basic recommendation engines to complex ML pipelines and even generative models. Due diligence must assess:

• How understandable, maintainable, and controllable the AI components are
• Data provenance and training data quality
• Quality of custom models and third-party dependencies (e.g., via API)
• License and compliance risks
• Team capability to operate and evolve AI systems

We’ll dive deeper into this fast-evolving topic in a dedicated follow-up post.

4. The Role of the Knowledge Base

A frequently overlooked but essential factor is the quality of the knowledge base around the software:

• How complete and accessible is the documentation?
• Can new developers ramp up quickly?
• Are historical decisions, bugs, and features traceable?

We evaluate:

• Structure and completeness of project documentation
• Usability for bug fixing, feature delivery, and onboarding
• Tool-based extraction of knowledge from wikis, issue trackers, and code comments

5. Conclusion: Future Readiness Beats Tech Stack

Whether it’s a legacy enterprise platform or a fast-growing SaaS solution – modern software due diligence must assess not only the current state of the technology, but also the structure and maturity of the entire software organization.

DETANGLE delivers the tooling for that: automated and deeply integrated with development workflows. This tooling and scenario-based interviews allow us to identify not only technical risks but also opportunities for sustainable growth, transformation, and scale.

6. Comparison: Legacy vs. Modern Agile Software

Interested in a modern, data-driven due diligence process?

Let’s talk – we support investors and buyers with actionable insights, deep software understanding, and strategic foresight.

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[0] Photo by Alexas Fotos