Merger and acquisitions can be quite polarizing experiences with some people liking or hating them. But in the wake of 2020’s rocky year (“rocky” would be a bit of an understatement), many big companies are coming out of their COVID-induced slumber to pick up the pieces of old deals before the expected recession hits home.
A merger or acquisition could be successful in seemingly every aspect, from transferring employees to picking and melding the buildings and inventory.
Yet, when looking at the newly reorganized company’s software assets, there is nothing but chaos. To make matters worse, software vendors will often expect this level of chaos and will target companies who have just recently gone through a merger and acquisition.
Shortly after the paperwork is signed to finish the Merger and Acquisition, a software audit will appear. So why is this mess so easily expected? And what can you do to ensure that your company is ready for this move?At MetrixData 360, we’ve helped many companies work through their mergers and acquisitions successfully and have ensured that the melding of their two software infrastructures went as smoothly as possible (it helps that we have many years of software licensing, negotiation, and audit defense on our side).
In this article, we’ll break down three common software asset-related problems that arise during a merger and acquisition. Then we’ll look at solutions to help you prepare (and even avoid) them.
Common SAM Issues that Arise During a Merger and Acquisition
Problem 1: The IT Teams Are Not Involved in the Transition
Often the IT assets are ignored or managed with minimal assistance from either company’s IT staff (they might be brought on after the deal is signed and it is simply time to move the assets).
Then, when they are brought on, it is revealed in their attempts to merge that there are records that aren’t properly maintained, proof of licenses that are missing, or elements of the data which are incomplete.
This is mostly a result of the sheer size and complexity of both software environments. Software licenses, past contracts, and maintenance and support agreements all need to be sorted through so that you know what is installed, who has what, what kinds of licenses can be combined, which can be kept separate etc.
Problem 2: Assumed Compatibility of Software Licensing Infrastructure
There’s no one way to build out your software licensing infrastructure, and just because two infrastructures worked well separately does not mean they’ll be compatible when put together.Software licenses are not easily transferred back and forth between organizations. Since companies do not technically own the software they have a license for, they therefore do not have the inherent right to transfer those licenses from one location to another. It will not be safe to assume that all your licenses are fit to go through a merger and acquisition. The process of transferring licenses will also need to be carefully documented to prove you have the right to use your new licenses.
In many clients we have worked with, despite having seemingly successfully transferred their software licenses, they did not have the proper documentation to back up this action. You will need to carefully consider and read through your contracts to ensure that they can be moved to this new organization and that the move is done properly or else you may find yourself in breach of your contracts.
Problem 3: The Other Company’s Software Compliance is not ConsideredThe contracts of many software vendors can include a “future affiliates” clause, which means that any new company brought on in a merger and acquisition will be roped into the current contract.
This could have cost implications that your company wasn’t expecting to get saddled with. It’s important that you be wary of targeting a company that doesn’t have any sort of a software asset management strategy in place, since it may mean that you can be burdened with compliance issues later on.
Using Software Asset Management to Ease the Merger and Acquisition Transition
Software Asset management is an excellent way of getting control of your software environment, not just for the occasion of the merger and acquisition but for the long term as your new combined identities get to grow together.
If you’d like to learn more about SAM and how to get started, you can check out article: Getting Started: Implementing Software Asset Management.
However, if you already have the basics down, then you can use them during your transition.
Step One: Get Your Own Assets in Order
Make sure what you’re bringing to the table is organized and efficient. If you don’t have any software asset management strategies in place, now is a great time to get started.
Involve ITAM and SAM in the merger early on and have the teams from each company perform a self-assessment. This is an excellent way to not only assess what each company has internally but will also prepare you for an audit that might be caused as a result of completing your merger and acquisition.
Your self-assessment should be aimed at answering the following questions:
- What assets are deployed?
- What assets are being consumed by employees and at what rate?
- What are the main opportunities to cut back on unnecessary spending in your environment (this will be useful as you move into potentially larger contracts)?
This self-assessment will create an effective license position. Your ELP will establish what licenses you have and cross reference that with the number of licenses that you are entitled to use. This is a great way of determining gaps in visibility and any compliance issues that you might have otherwise accidentally passed on to your new partner.
Step Two: Take a Look at Your New Partner
Since you are going to be working together, it is important that you are aware of your new partner’s software history and the current state of their software licenses. Follow each of the steps below to ensure that you will be able to mesh well with your software environment.
- What is the current state of the company we are acquiring/merging with? Are they compliant? Are they at risk?
- Do you have access to quantities and products in use?
- Which price level are they in (i.e., Microsoft’s EA program has four price levels based on the number of licenses you buy)? Will your combined licenses bump you into a new bracket with certain vendors?
- What is the agreement start date? What is the agreement end date?
- Do they have licenses that you are lacking or vice versa? It may be possible to avoid purchasing new licenses when you could potentially trade with your target.
Step Three: Determine How Your Two Licensing Environments Will Fit Together
The last step you need to do is to figure out how your environments will work together. To do that, you’ll need to start considering the following questions:
- Which products and services are going to be removed or discontinued and which will be maintained?
- How will the publisher of each license be transferred to the ownership of the new organization and how long will the transition take for each product?
- Do your contracts even allow you to transfer your licenses?
- Who are the key contacts at either organization who will be responsible for providing data and information on the software assets?
This is very important to determine as mergers and acquisitions often result in employees being moved around, let go, or offered a retirement package. You don’t want to realize certain important people with critical information have already left the building.
Have a Stress-Free Merger and Acquisition
Mergers and Acquisitions can be grueling experiences that could take months, even before the pandemic hit. However, the last thing that you want is for your merger and acquisition to grind to a halt because your software environments are incompatible, which we have seen happen many times.
It’s important to be aware of this potential incompatibility before the last of the paperwork is signed, which is why many companies benefit from hiring MetrixData 360 to help them through this transition.
We know how to deal with the most tangled of software environments, find missing data, and create reasonable solutions to sticky software contract situations. If you’d like to learn more about how MetrixData 360 can help your company through your merger or acquisition, you can contact us for more information.