Navigating Outdated Technology in India’s IT M&A Landscape

India’s Information Technology (IT) sector, a $250 billion juggernaut in 2025, drives global innovation through rapid tech adoption and fierce competitiveness. Mergers and acquisitions (M&A) fuel scale, talent acquisition, and market expansion, but outdated technology poses a hidden threat. This article equips senior leaders with strategies to mitigate outdated technology risks in IT M&A, ensuring value creation through robust due diligence and integration planning.

The Hidden Threat of Outdated Technology in IT M&A

India’s IT industry thrives on acquiring niche players, SaaS platforms, or legacy product companies to gain intellectual property (IP), talent, or market access. However, outdated technology in target firms often creates value traps. Technical debt aging code, unsupported frameworks, or undocumented systems can inflate integration costs and derail synergies. For example, a large IT services firm acquiring a SaaS platform may find its core product relies on outdated technology, requiring costly rewrites. Recognising and addressing outdated technology during due diligence is critical to avoid turning strategic assets into liabilities.

1. Recent Trends Shaping IT M&A (June 2025)

Several trends highlight the growing impact of outdated technology in India’s IT M&A landscape:

• AI/ML and Cloud-Native Acquisitions: Indian IT giants target AI/ML, cloud-native, and cybersecurity startups to stay competitive. However, outdated technology in the acquirer’s or target’s infrastructure can complicate integration, delaying value realisation.
• Mid-Tier Firms’ Legacy Challenges: Many mid-tier IT firms grapple with outdated technology in core products or delivery systems, making them attractive yet risky acquisition targets.
• SEBI Norms and Tech IPOs: New SEBI regulations encourage tech IPOs but expose technical debt. Firms with outdated technology face investor scrutiny, as modernisation costs impact valuations.
• Cybersecurity Mandates: Stringent data protection laws force upgrades, compelling firms with outdated technology to modernise under regulatory pressure, often at significant cost.

These trends underscore the urgency of addressing outdated technology to ensure M&A success and compliance.

2. Risks of Acquiring Companies with Outdated Technology

Acquiring firms with outdated technology introduces significant risks:

• Technical Debt: Hidden code complexity, missing documentation, and obsolete frameworks increase integration costs, diverting resources from innovation.
• Integration Challenges: Merging modern and legacy systems delays synergies. Incompatible outdated technology requires custom solutions or rewrites, stretching timelines and budgets.
• Acquisition Risks: Buyers may overpay for firms with legacy products needing complete overhauls, misjudging the cost of addressing outdated technology.
• Talent Drain: Engineers skilled in outdated stacks may resist upskilling or exit, especially if modernisation disrupts workflows.
• Regulatory Compliance: Legacy infrastructure often fails to meet India’s Data Protection Act or global cybersecurity standards, exposing firms to fines and breaches.

These risks demand proactive strategies to mitigate outdated technology in IT M&A.

3. Strategic Implications Through a Hybrid Consulting Lens

A hybrid consulting approach integrating management, finance, legal, and technology expertise helps navigate outdated technology in IT M&A:

• Due Diligence: Conduct deep code audits, infrastructure scans, and IP validity checks to flag Legacy technology. Assess tech stacks, documentation, and maintenance history to quantify technical debt.
• Valuation Strategy: Apply discounts for technical debt and factor in modernisation CAPEX. Realistic valuations prevent overpaying for firms with outdated technology.
• Deal Structuring: Use earn-outs tied to tech migration milestones, aligning incentives and mitigating risks from Legacy technology.
• Post-Merger Integration: Plan phased legacy system sunsets, talent reskilling, and cloud-native migration to streamline operations and reduce technical debt.
• Legal Risk: Evaluate legacy code for IP infringement and cyber vulnerabilities. Ensure compliance with data protection laws to avoid penalties.

This multi-faceted approach ensures Legacy technology does not undermine M&A value.

Illustrative Example: Turning a Liability into an Asset

In 2023, an Indian mid-cap IT services firm acquired a US-based ERP product company. Due diligence flagged outdated technology unsupported .NET frameworks and monolithic architecture. The buyer took decisive steps:

• Allocated 20% of the deal value for modernisation.
• Renegotiated the price to reflect technical debt.
• Phased out redundant modules, replacing them with cloud-native solutions.

Within two years, the firm cut technical debt by 40%, enhanced scalability, and achieved significant synergies, showcasing the power of addressing outdated technology strategically.

Conclusion: Mastering IT M&A with Proactive Strategies

To succeed in India’s IT M&A landscape, leaders must proactively tackle outdated technology. Conduct rigorous technical due diligence to uncover hidden technical debt. Adjust valuations to account for modernisation costs and structure deals with performance-based milestones. Post-merger, execute phased legacy sunsets, invest in reskilling, and ensure regulatory compliance. By addressing outdated technology head-on, IT firms can unlock synergies, drive innovation, and solidify India’s global leadership in technology.

About LawCrust

LawCrust Global Consulting Ltd. delivers cutting-edge Hybrid Consulting Solutions in Management, Finance, Technology, and Legal Consulting to ambitious businesses worldwide. Recognised for our cross-functional expertise and hybrid consulting approach, we empower startups, SMEs, and enterprises to scale efficiently, innovate boldly, and navigate complexity with confidence. Our services span key areas such as Investment Banking, Fundraising, Mergers & Acquisitions, Private Placement, and Debt Restructuring & Transformation, positioning us as a strategic partner for growth and resilience. With an integrated consulting model, fixed-cost engagements, and a virtual delivery framework, we make business transformation accessible, agile, and impactful.

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