Inadequate Software Asset Management (SAM) during mergers and acquisitions

Buying a company or merging to create a new company, without understanding the current software licensing position, can become costly. Financial and legal due diligence is standard practice in mergers and acquisitions, but IT implications are seldom given the same required attention. Software Asset Management (SAM) is one example of where inadequate IT due diligence is likely to result in increased exposure to financial and compliance risk; unplanned and unnecessary IT costs can significantly impact on the overall economic viability of the deal. IT due diligence will eventually become a standard part of the mergers and acquisitions process.

With significant changes taking place including new job roles, redundancies, new computer systems and business processes, the addition of new geographical locations and new legal jurisdictions, this is likely a time when compliance is low. Therefore it is not surprising that announcements of mergers and acquisitions are an impetus for software licence audits by vendors.

Key questions to ask include:

  • What is the current position with software licensing across both companies?
  • What is the software licence shortfall value of the target company?
  • Has the software licence shortfall cost been factored into the sale price of the business?
  • How mature are SAM processes in both companies?
  • What will the software licence position look like after two companies have merged?
  • How much will it cost to purchase new licences?
  • Who owns the software licences?
  • Can the software licences be reallocated to a new organisation?
  • Can existing software be used within the newly acquired company?
  • What opportunities are available to renegotiate licences?

Important points to remember are:

  • Proactive dialogue with software vendors during the merger or acquisition process will result in increased bargaining power and strengthen supplier relationships
  • Reactive dialogue in response to a software vendor licence audit puts the licensee in a relatively weak position

Mergers and Acquisitions: The case for early IT involvement is now available following research to improve post-acquisition integration and assess the financial impact of mergers.