Why Borrowing Your Portfolio CTO for Diligence Is the Most Expensive Cheap Option in PE

Drafting the CTO—or worse, the senior architect team—from an existing portfolio company to vet a new acquisition looks thrifty on paper. PE investors often think, “Our people know tech, so we’ll keep costs down and speed things up.”In reality it drains value three ways: inside the asset you already own, inside the deal you’re trying to price, and inside the post‑close integration plan that hasn’t even been scoped.

1 Opportunity Cost—You Rob Peter to Underwrite Paul

Road‑map drag. Every hour a portfolio CTO or senior architect spends combing through someone else’s stack is an hour not spent shipping features, closing SOC alerts, or delivering the current asset’s EBITDA plan.
Service‑desk exposure (in MSP's). Live SLAs, patch cycles, and compliance audits don’t pause. Thin oversight during diligence leaves your NOC/SOC one incident away from a client‑churn headline.
Leadership whiplash. Context‑switching between “hit this quarter’s target” and “find skeletons in another environment” slashes focus—and focus is the most expensive capital in a scaling tech business.

2 Bias & Blind Spots—When Familiarity Breeds Over‑Confidence

Hidden trigger	Why an insider misses it
Licence booby‑traps (RMM, SIEM, SaaS per‑endpoint overages)	They assume their own vendor deals apply and never probe the fine‑print.
Shadow AI claims	Reviewers focus on feature fit, not model provenance or data‑governance risk.
Tenant‑segregation gaps (MSP)	Home‑grown security baselines feel “normal,” so cross‑client blast radius is underestimated.
Cultural clash in change control	What works in their shop is labelled “best practice,” dismissing alternative—but effective—processes.

3 Negotiation Leverage Lost—Soft Findings, Hard Money

Price chips evaporate. Insiders rarely frame risks in the stark language that justifies valuation discounts, escrows, or earn‑out claw‑backs.
Time box shrinks. Every week operators spend on diligence reduces the window to tighten reps & warranties before signing.
Integration surprise. Underscoped technical debt or tooling misalignment surfaces post‑close—right when you promised Day‑1 synergies.

4 The “DIY” Trap—When Diligence Falls to the Seller or a Business‑Unit Lead

Skipping the portfolio CTO altogether and asking the target company to complete its own red‑flag checklist sounds neat, but is merely the seller grading their own homework.

Equally risky is the PE temptation to delegate the task to a business‑unit leader in the portfolio company under the assumption that “it’s just people integration as they dont have any special tech”. Business heads may excel at running sales or service P&L, yet they usually lack the forensic eye to uncover hidden technical debt, licence‑audit minefields, or automation gaps that turn apparent head‑count synergies into manual ticket triage. The result: a comforting story of “cultural fit” while real integration costs—tooling, process, platform convergence—remain off balance‑sheet.

5 A Two‑Step Fix That Saves Everyone’s Time

Timeline	Impact Service Tier	What You Get
Days 1‑10	Impact Red‑Flag Scan	Independent heat‑map of existential risks—code health, tooling landmines, SLA exposures—before you draft the term sheet or LOI.
Days 11‑30	Impact Due Diligence	Quantified tech‑debt bill, cloud‑unit economics, 100‑day integration blueprint (including stack‑convergence costs for MSP deals).

Internal leaders stay focused on value creation; you receive a neutral, board‑ready view that protects both price and post‑close margin.

In short,

Borrowing portfolio technologists—or business‑unit heads—for diligence feels thrifty but quietly converts productive capacity into hidden deal risk. Independent, time‑boxed expertise beats “free” every time, especially in multi‑tenant, SLA‑driven managed‑services environments.

Heading toward a term sheet or LOI? Book an Impact Red‑Flag Scan before redeploying hard‑earned talent—and preserve value on both sides of the deal. Email michael @theimpactcto.com or connect on LinkedIn.

Find out more at www.theimpactcto.com .