An Eight-Figure Acquisition Target with Few Technical Answers
Sometimes people ask what was the most egregious skeleton I found in a closet.
Without a doubt, it was the case of The Company With No Employees. During technical interviews, it’s normal for one individual to be the main point of contact. That person will refer back to other team members as needed, so the process includes several cycles of q&a.
At one particular company, an 8-figure acquisition, the contact person had the title of CTO. This is normal. What’s not normal is that they were able to answer very few questions on their own. Usually a CTO refers details to team specialists, but answers most directly.
The CTO Could Not Explain How the System Worked
What was really not normal was the number of times he came back with no answer for a question, saying simply, “I’m sorry, but there’s no one here who can answer that”. These were questions like “what tools do you use for automated testing”, or “how do your servers manage load balancing”. One should remember the tools which are in daily use.
The Disclosure: The Company Had Zero Employees
After several rounds of key questions unanswered, we asked directly, “Exactly how many people are currently on payroll on your technical team?”. After a long pause, he replied, “Zero.”
We were stunned. The follow-up question: “How many people are currently on payroll at the entire company?”. Again he answered, “Zero. It’s just me and I’m not drawing a salary. Everyone else has left.”
Normally staffing is not part of TDD, but this issue was so extreme that we called an emergency interim meeting with the client. “Are you aware that you’re buying a company with literally zero employees? Where the one person remaining is unsure how their own system works?”
Long pause from the client.
“No. We were not aware of that.”
Stopping the Diligence Engagement Early
Like all contractors, I’m never eager to walk away from a paying engagement, but it was necessary to ask whether the client wanted the diligence contract to be aborted early. They said yes.
