Preparing for a future liquidity event requires strategic foresight, especially from a technology due diligence perspective. In this Virtual Coffee discussion, Allen Cinzori of SEG speaks with Leo Tucker, CEO at KMS Technology, about key steps software companies can take today to ensure a seamless transition when entering an M&A process.
{Allen Cinzori:} Welcome to another SEG Virtual Coffee session. Today, I’m joined by Leo Tucker, COO (now CEO) at KMS Technology. Leo and I first met during a tech due diligence engagement about a year ago, and we’ve since had the pleasure of collaborating on multiple projects.
Our discussion today will focus on preparing for a future liquidity event, particularly from a tech due diligence standpoint. Whether you’re considering an exit in the near term or a few years down the line, understanding and addressing key diligence areas can significantly impact valuation and deal success.
{Allen Cinzori:} What are the key technology diligence items SaaS CEOs should consider if they’re planning for a liquidity event in the near term or within the next two to three years?
{Leo Tucker:} The first thing I always stress is documentation. Many companies lack a solutions architecture document, which is like trying to build a house without blueprints. Proper documentation is crucial, including code architecture, technical decisions, and development methodologies. If you haven’t done this yet, start now—it can be completed in a few weeks.
Second, know your issues before they come up in diligence. Bring in an external expert to review your architecture, code, and team structure. An unbiased perspective helps identify potential risks early and positions you to address them proactively.
Third, tell a compelling story about your technology. Buyers want to understand both technical and business aspects. Identify someone in your team who can effectively communicate how your technology enables growth and scalability.
If you have 2–3 years before entering a process, you have time to fix underlying technology issues like technical debt, scalability concerns, and architectural bottlenecks. Addressing these in advance strengthens your positioning.
Learn More: What is Due Diligence?
{Allen Cinzori:} What are some of the biggest mistakes SaaS companies make during tech due diligence?
{Leo Tucker:} Some common pitfalls include a lack of documentation, where poor or missing records make it difficult for a buyer to assess the platform’s viability. Another issue is over-reliance on key individuals—if all institutional knowledge resides in a single person’s head, that presents a major risk. Unresolved technical debt is also a concern, as legacy systems and outdated code can deter investors or lower valuation. Additionally, security gaps, such as failure to address security vulnerabilities and compliance issues, can be deal-breakers. Proactively identifying and resolving these issues helps ensure a smoother diligence process and a more attractive exit.
{Leo Tucker:} Buyers evaluate three key areas: people, process, and technology. A major red flag is when all knowledge resides in one person’s head. Proper documentation and training backups ensure continuity. The development methodology and product requirements gathering process also play a crucial role in scalability and long-term growth. A structured process prevents bottlenecks and reliance on a single visionary leader. On the technology side, buyers assess the tech stack, its rationale, and open-source code usage. Proper documentation of open-source components is critical, as buyers often conduct a Black Duck or similar audit to check for security vulnerabilities and licensing issues.
{Allen Cinzori:} A major mistake is when companies fail to demonstrate scalability. If your product’s growth depends solely on an exceptional dev team, a buyer may worry about replacing or expanding that talent.
{Leo Tucker:} Exactly. Investors want to see that your team and technology can scale without heavy reliance on a few key individuals.
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{Allen Cinzori:} Open-source usage is always a diligence focus. What should sellers do to prepare?
{Leo Tucker:} Every company uses open-source code, which is fine, but you need to document where and how. Buyers will conduct a Black Duck or similar audit to check for security vulnerabilities and licensing issues. If you’re using open source, maintain proper documentation and licensing compliance to avoid diligence red flags.
{Allen Cinzori:} If a SaaS CEO is planning to enter an M&A process in six months, what’s your top piece of advice?
{Leo Tucker:} Engage an external firm to conduct a tech assessment before going to market. A small upfront investment could mean millions in value by preventing issues from surfacing in diligence. This preparation builds confidence and ensures a smoother process.
{Allen Cinzori:} I completely agree. We’ve seen KMS help companies navigate complex diligence processes and unlock value for sellers. Thanks, Leo, for sharing your insights today.
