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.  

  1. Understand Your Software Licenses  
Even before the move has begun, you’ll need to know if you and the other company are ready and capable of the move. This requires you to have a complete understanding of your software licenses and those of your target. Here are just a few of the questions you should have the answers to before you complete your merger and acquisition. You can consult both of your active quantities and products in use to find solutions to these questions: 
  • 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. 

  1. 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.  

  1. Trim Back Unneeded Products and Services 
Once the merger and acquisition is completed, you may find that your combined software environments will have a lot of duplication in both licenses and services. There’s no need to have these competing elements in your combined software licensing environment as they will only serve as a waste of money and may cause budget issues later.   Figure out which products and services can be removed and discontinued between the two of you and which ones are going to be maintained in the shared environment. This can also be an excellent time to do some spring cleaning and find unused and unnecessary licenses in your own environment.  

  1. Check Your Licenses for Transferring Legalities 
It’s important to determine the exact process each publisher has when it comes to how licenses will be correctly transferred over to the ownership of the new organization that comes out of your merger and acquisition. If the licenses that you were intending to move actually do not have transferable rights, then they will be essentially useless after the merger and acquisition.  You should also figure out how long the transfer process takes and when it can be started. And you’ll need to determine how easy new users can be added to the contracts or how critical software can be expanded into new environments.   You might want to make note of any clauses in your target’s contracts that state that you, as an affiliate, will be roped into any compliance issues that the target is experiencing. This has, at times, proven a deal-breaker for companies going through a Merger and Acquisition. One company finds out that the other company has millions of dollars in compliance issues, a burden they’ll now have to share, and they then decide to back out of the merger and acquisition.  It’s important to make sure you avoid this situation before you find yourself in the thick of it. 

  1. Consider Future Growth 
With so many employees getting traded, let go, and moved around during a M&A, it will be important to map out any long term goals your IT team has for its software infrastructure, including any Cloud or Hybrid Cloud solutions. This will ensure clarity as new people are brought onto the staff and will help to ensure compliance through proper planning.

Measuring Software Compatibility Before a Merger and Acquisition

Mergers and Acquisitions can be a whirlwind of events and as much as it might add another insurmountable task to your plate, it’s important that you make sure your software environments are compatible and capable of blending properly.  We suggest that, if you are acquiring the company, you audit the assets you receive as soon as possible, either immediately before the merger is complete or immediately afterward. This way you can identify any data gaps in what you acquired regarding deployment or licensing. If you are selling your assets, you may want to audit the equipment which is being traded as a part of the divestiture to ensure you are transferring only the licenses that you need to transfer and nothing more. This includes desktops, laptops, and servers, etc.  Regardless of whether you are selling, buying, or a little bit of both, you need to make sure that you are prepared for when that time arrives, and MetrixData 360 is here to defend your interests. We’ve helped many companies get through their mergers and acquisitions while making sure they remain compliant and cost-effective. Make sure you check out our self-assessment service page for more details! 

About Mike Austin

Mike AustinMike Austin is the CEO and team lead here at MetrixData 360. Mike brings more than 15 years of Microsoft licensing experience to his clients’ projects. He assists companies with negotiations of Microsoft Enterprise Agreements (EA), Premier Support Contracts, and Select Agreements, from Fortune 500 to organizations with as few as 500 employees. Mike's vast experience across multiple industries including financial services, high tech, manufacturing, media, health care, government, and retail give him an edge in any business environment. In addition to helping negotiate contracts, he assists clients with creating and implementing software asset management processes to prevent over-purchasing of licenses and ensures terms and conditions reflect actual usage.