The $500k "Code Tax" that Killed a SaaS Deal

January 03, 2026

by a professional-advisory in Haifa, Israel

Last month, I audited a B2B SaaS company for a searcher under LOI. The financials were perfect: $1.5M EBITDA, 10% churn. But the code told a different story. The entire platform was built on AngularJS 1.x (End-of-Life since###-###-#### The 'Proprietary AI' was just a wrapper for a hardcoded OpenAI key. And the database had zero foreign keys (data integrity nightmare). The Verdict: The cost to modernize the stack ('Remediation Capex') was $550,000. When the searcher brought this to the bank, the Adjusted DSCR fell below 1.15x. The deal died, but the searcher saved his Personal Guarantee. The Lesson: In 2026, Technical Debt isn't an engineering problem. It's a financial liability. I’ve open-sourced our 'Technical Solvency Framework' to help searchers quantify this risk before signing the LOI. Comment 'Solvency' below and I'll DM you the 1-page PDF.

Reply by a searcher
from Georgia Southern University in Orlando, FL, USA

it's all tech debt, all the way down. the only time your code base isn't tech debt is when there are zero lines of code. code rots. the infrastructure that runs it rots too. that said, that doesnt mean it needs to be rewritten to be maintained. _one opinion_ might be "we have to rewrite and move off of angular" but another _opinion_ would be to just keep making money with what you have. they're both opinions. they're both options. but software without continuous active maintenance _will die_. plan accordingly.

Reply by a searcher
in New Jersey, USA

Wow. That is insightful. I've never considered that the existing codebase could be a capex time bomb waiting to explode once the deal was closed. Something new to keep my eyes open for when evaluating Saas oppotunities.

+14 more replies.

Join the discussion