Technical Due Diligence: Code Audits with Claude in M&A Deals

1. Why technical due diligence has a real say in deal value

In software-related M&A deals, the codebase is often the most valuable yet hardest-to-assess asset. An investor or buyer wants to know whether the product stands on a solid technical foundation, or whether massive technical debt, outdated dependencies, and untested core modules hide behind a working surface, the kind of issues that require expensive rework after the deal closes.

The challenge is time pressure: a typical due diligence window spans a few days to a few weeks, during which an external audit team is expected to assess a codebase that has grown over years and often spans several hundred thousand lines. A complete manual review simply is not realistic within that timeframe, which is why structured, tool-assisted approaches are gaining importance.

2. What can be systematically checked with Claude

For a technical audit, Claude can be applied along clearly scoped dimensions: architectural quality and module boundaries, test coverage and test quality, dependency age and known security vulnerabilities in used packages, code duplication, and the consistency of naming conventions and error handling across the entire repository. Each dimension can be structured as its own repeatable prompt run over representative parts of the codebase.

It matters to avoid asking Claude generically about quality and instead ask concrete, checkable questions: how many of the core business logic modules have no tests? Which dependencies have not been updated in more than two years? Which patterns point to a single critical developer whose knowledge is documented nowhere? Such concrete questions produce more defensible, comparable results than an open-ended quality assessment.

3. A structured prompt for the initial inventory

The first step of an audit is a structured inventory that serves as the foundation for every further deep dive. A good prompt does not ask for a subjective impression but for countable, traceable facts that can later be substantiated in the report.

# Claude Code: structured initial inventory for a due diligence audit
claude "Create a technical inventory of this repository:
1. Architecture overview: main modules, dependencies between modules,
   recognizable layer separation.
2. Test coverage: share of core modules with existing tests, sample-based
   assessment of test quality.
3. Dependencies: count of outdated packages (older than 24 months),
   known CVEs in package-lock/composer.lock.
4. Technical debt: TODO/FIXME density, unusually large files/functions,
   duplication patterns.
Output the result as a table with category, finding, evidence location,
and risk rating."

4. Making technical debt quantifiable for non-technical readers

An investor report rarely addresses a technical audience. A finding like high cyclomatic complexity in module X carries little meaning for an investment committee. Claude can be instructed to translate technical findings into business-relevant statements, for example an estimated effort class for remediation or a classification of what risk a finding poses to the product's planned scaling.

A three-tier structure has proven effective: technical finding, business impact, estimated remediation effort in person-days as a rough order of magnitude. This translation makes it easier for an investment committee to weigh technical risks against the purchase price or the planned investment amount without every committee member having to read code themselves.

5. Systematically placing security risks into the audit report

Alongside code quality, an assessment of the security posture belongs in every serious technical audit. Combined with the results of classic dependency scanners, Claude can produce a prioritized list that distinguishes between theoretically present vulnerabilities in unused code and actually reachable, production-relevant risks, a distinction that is decisive for assessing the real risk.

Equally relevant for an investor report is how credentials, API keys, and secrets are handled in the repository and in the deployment configuration. A finding like database credentials sitting in plain text in the repository history, even if they have since been removed, belongs in the report because it points to necessary rotation measures after a change of ownership.

6. Time savings compared with a purely manual audit

The practical benefit shows up most in the initial review phase: instead of an audit team spending days just building an overview of module boundaries and dependencies, a Claude-assisted first pass delivers a structured map within a few hours, one the human experts can use to specifically dig into the most critical areas rather than searching the codebase blindly.

In practice this shifts the time spent from initial review toward verifying and deeply assessing the most important findings. The audit team spends its limited time where human judgment matters most, for example assessing architectural decisions in a business context, instead of burning it on merely locating findings.

7. Limits with very large legacy codebases

With codebases spanning several million lines, often grown over decades across multiple technology generations, even a Claude-assisted audit hits the available context window and the limit of what can be read at all within the available time. Here only a targeted sampling strategy helps, selecting representative, business-critical modules for deeper review instead of trying to cover every line.

Historical context knowledge, why a particular decision that looks strange today was made back then, is also rarely fully preserved in raw code alone. A credible report therefore makes transparent which parts of the codebase were actually reviewed in depth and which were only sampled, so the investment committee can realistically judge the report's evidentiary weight instead of assuming false completeness.

8. Its place in the overall process: a complement, not a replacement for the audit team

A Claude-assisted audit does not replace an experienced technical audit team that understands the business context, the market situation, and the buyer's strategic plans. The actual assessment of whether a found risk threatens the deal or merely deserves a footnote in the report requires experience and judgment that go beyond pure technical analysis.

Used well, Claude is therefore an accelerator for the auditors themselves: it delivers the structured initial map and the quantified findings that let experienced professionals focus their limited time specifically on assessment and prioritization instead of spending a relevant share of it on pure finding location.

9. Checklist for a defensible audit report

A defensible technical due diligence report should contain at least the following elements: an architecture overview with recognizable layers and module boundaries, a quantified assessment of test coverage, a prioritized list of security-relevant findings with a reachability assessment, a translation of technical debt into estimated remediation effort, and a transparent statement of which areas were reviewed in depth versus only sampled.

When this framework is consistently combined with Claude as an accelerator for inventory-taking and for translating technical findings into business language, the time to a defensible investor report shortens noticeably, without the actual professional assessment ever being delegated to a machine. It is exactly this combination of speed and human judgment that makes the approach practically valuable for M&A deals.

10. Summary

11. FAQ: Technical Due Diligence with Claude: The Essentials at a Glance