Mergers and Acquisitions often prove a messy juggling act of trading assets, people, and a boat load of documents, leaving you dizzy and uncertain about where anything is anymore.
While it may not seem that important with so much going on, many companies often neglect to examine how their software contracts will transfer between the acquiring company and the target company after the M&A is completed.
At MetrixData 360, we have dealt with many companies who have found themselves in this situation and confronted with a tidal wave of complications and licensing issues at the very last leg of their merger and acquisition as a result. So, to help you through this transition and avoid this fate, in this blog post, we’ll go through your to-do list for making sure your software environment is in good shape for the transition.
Each of your publishers and the publishers of the other organization needs to be contacted and you’ll need to get copies of the purchase history reports for both you and the other company.
These purchase history reports should include past purchases and current products with active support and maintenance. Most importantly, you should note any upcoming expiration dates your target has. You’ll need to work with each publisher one-by-one, starting with the ones who are closest to a renewal, and you’ll need to check what sort of new licenses you may need to purchase.
This can be a whole other issue since purchasing the wrong number of needed licenses could mean compliance issues or wasted licenses, both of which could prove costly to you.
A word of caution though: mergers and acquisitions can often trigger a software audit since software vendors will expect things to be disorganized and non-compliant immediately after the merger and acquisition is completed.
While this step needs to be done, you should be careful when approaching your publishers and letting them know you are going through a merger and acquisition. It may spark their attention.
- Understand Your Software Licenses
- When do you expect to integrate the new organization and their assets into your environment?
- Will your assets merge right away or will significant plans to align and merge be required?
- Who are the key contacts at either organization who will be responsible for providing data and information on the software assets?
- Can you report on the licensing and quantities in production effectively?
- What publishers does the other company have in their environment?
- What products are they using from their publishers?
- For each publisher, what volume license program are they using to acquire their licenses?
- Do they have any special instructions, amendments, or exceptions that have been provided by the publishers in question?
- What level are they regarding pricing tiers? For example, Microsoft’s EA has a waterfall pricing structure based on the number of seats you have. After the merger and acquisition, both of you may be pushed into a higher level with greater discounts.
- What is the start and end date of their agreements?
- How old is their technology? Will it be compatible with yours? If they have legacy software, your two environments may not even recognize the other’s existence.
Determine Software Compliance for Both Companies
According to MetrixData 360’s own CEO, Mike Austin, one of the most shocking things we see many CIOs confronted with during or after their merger and acquisition is:“The shattering of their previously held belief that the acquired company is compliant. They are not expecting to be weighted down with millions of dollars’ worth of compliance issues. While it may not always be that extreme, quite often the perfectly compliant company they were signing up for is far from what they’re actually getting. Since not all licenses are transferable, not doing an assessment of the acquired company’s licenses across all vendors is just inviting future massive and unbudgeted compliance issues later on.”Since many software publishers have an “affiliate clause” or its equivalent in their contracts, this means that whatever compliance issues that the other company has going into this arrangement will suddenly be your problem as well. Considering what a massive and unbudgeted expense compliance issues can be to companies, you should never complete a merger and acquisition without knowing where the other company stands with their various software vendors. If you don’t know what compliance issues the other company has, you’re bound to eventually find out. M&As are one of the leading factors that will initiate a software audit.
- Contact the Software Publishers
Each of your publishers and the publishers of the other organization needs to be contacted and you’ll need to get copies of the purchase history reports for both you and the other company.
These purchase history reports should include past purchases and current products with active support and maintenance. Most importantly, you should note any upcoming expiration dates your target has. You’ll need to work with each publisher one-by-one, starting with the ones who are closest to a renewal, and you’ll need to check what sort of new licenses you may need to purchase.
This can be a whole other issue since purchasing the wrong number of needed licenses could mean compliance issues or wasted licenses, both of which could prove costly to you.
A word of caution though: mergers and acquisitions can often trigger a software audit since software vendors will expect things to be disorganized and non-compliant immediately after the merger and acquisition is completed.
While this step needs to be done, you should be careful when approaching your publishers and letting them know you are going through a merger and acquisition. It may spark their attention.
Related: Dealing with an Upcoming Renewal? Check out our Contract Negotiation Guide for some tips to help you save big!
- Trim Back Unneeded Products and Services
- Check Your Licenses for Transferring Legalities
- Consider Future Growth