Don’t Allow Software Licensing to Derail Your M&A

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Assuming that all parties are compliant in their licensing is a risky proposition. Most organizations are deficient in some manner of licensing. Know where those gaps are before finalizing M&A activity and have a plan in place to mitigate them right away.
Vendors will target companies that have undergone recent M&A activity with an audit. Vendors know that the many moving parts of M&A activity often result in license shortfall, and they may look to capitalize during the transition with audit revenue.
New organizational structure can offer new licensing opportunities. Take advantage of the increased volume discounting, negotiation leverage, and consolidation opportunities afforded by a merger or acquisition.

Our Advice

Critical Insight

To mitigate risks and create accurate cost estimates, create a contingency fund to compensate for unavailability of information.
Gathering and analyzing information is an iterative process that is ongoing throughout due diligence. Update your assumptions, risks, and budget as you obtain new information.
Communication with the M&A team and business process owners should be constant throughout due diligence. IT integration does not exist in isolation.

Impact and Result

CIOs must be part of the conversation during the exploration/due diligence phase before the deal is closed to examine licensing compliance and software costs that could have a direct result on the valuation of the new organization.
Both organizations must conduct thorough due diligence (such as internal SAM audits), analyze the information, and define critical assumptions to create a strategy for the resultant IT enterprise.
The IT team is involved in integration, synergy realization, and cost considerations that the business often does not consider or take into account with respect to IT. License transfer, assignability, use, and geographic rights all come into play and can be overlooked.

Don’t Allow Software Licensing to Derail Your M&A Research & Tools

Start here – read the Executive Brief

Read our concise Executive Brief to find out why you shouldn’t allow software licensing to derail your M&A deal, review Info-Tech’s methodology, and understand the four ways we can support you in completing this project.

Don’t Allow Software Licensing to Derail Your M&A – Executive Brief

1. Understand the M&A process with respect to software licensing

Grasp the key pain points of software licensing and the effects it has on an M&A. Review the benefits of early IT involvement and identify IT’s capabilities.

2. Perform due diligence

Understand the various steps and process when conducting due diligence. Request information and assess risks, make assumptions, and budget costs.

3. Prepare for integration

Take a deeper dive into the application portfolios and vendor contracts of both organizations. Review integration strategies and design the end-state of the resultant organization.

4. Execute on the integration plan

Review initiatives being undertaken to ensure successful integration execution. Discuss long-term goals and how to communicate with vendors to avoid licensing audits.

Workshop: Don’t Allow Software Licensing to Derail Your M&A

Workshops offer an easy way to accelerate your project. If you are unable to do the project yourself, and a Guided Implementation isn't enough, we offer low-cost delivery of our project workshops. We take you through every phase of your project and ensure that you have a roadmap in place to complete your project successfully.

Module 1: M&A Overview

The Purpose

Identify the goals and objectives the business has for the M&A.
Understand cultural and organizational structure challenges and red flags.
Identify SAM/licensing challenges and red flags.
Conduct maturity assessment.
Clarify stakeholder responsibilities.
Build and structure the M&A team.

Key Benefits Achieved

The capabilities required to successfully examine software assets and licensing during the M&A transaction.
M&A business goals and objectives identified.
IT M&A team selected.
Severity of SAM challenges and red flags examined.

Activities

Outputs

1.1

Document pain points from previous experience.

1.2

Identify IT opportunities during M&A.

M&A Software Asset Maturity Assessment

Module 2: Due Diligence

The Purpose

Take a structured due diligence approach that properly evaluates the current state of the organization.
Review M&A license inventory and use top five vendors as example sets.
Identify data capture and reporting methods/tools.
Scheduling challenges.
Scope level of effort and priority list.
Common M&A pressures (internal/external).

Key Benefits Achieved

A clear understanding of the steps that are involved in the due diligence process.
Recognition of the various areas from which information will need to be collected.
Licensing pitfalls and compliance risks to be examined.
Knowledge of terms and conditions that will limit ability in pre-integration planning.

Activities

Outputs

2.1

Identify IT capabilities for an M&A.

2.2

Create your due diligence team and assign accountability.

M&A Software Asset RACI Template

2.3

Use Info-Tech’s IT Due Diligence Report Template to track key elements.

2.4

Document assumptions to back up cost estimates and risk.

IT Due Diligence Report

Module 3: Pre-Integration Planning

The Purpose

Review and map legal operating entity structure for the resultant organization.
Examine impact on licensing scenarios for top five vendors.
Identify alternative paths and solutions.
Complete license impact for top five vendors.
Brainstorm action plan to mitigate negative impacts.
Discuss and explore the scalable process for second level agreements.

Key Benefits Achieved

Identification of the ideal post-M&A application portfolio and licensing structures.
Recognition of the key considerations when determining the appropriate combination of IT integration strategies.
Design of vendor contracts for the resultant enterprise.
Recognition of how to create an IT integration budget.

Activities

Outputs

3.1

Work with the senior management team to review how the new organization will operate.

3.2

Document the strategic goals and objectives of IT’s integration program.

3.3

Interview business leaders to understand how they envision their business units.

3.4

Perform internal SAM audit.

3.5

Create a library of all IT processes in the target organization as well as your own.

3.6

Examine staff using two dimensions: competency and capacity.

3.7

Design the end-state.

3.8

Communicate your detailed pre-integration roadmap with senior leadership and obtain sign-off.

IT Integration Roadmap Tool
Effective License Position

Module 4: Manage Post-M&A Activities

The Purpose

Finalize path forward for top five vendors based on M&A license impact.
Disclose findings and financial impact estimate to management.
Determine methods for second level agreements to be managed.
Provide listing of specific recommendations for top five list.

Key Benefits Achieved

Initiatives generated and executed upon to achieve the technology end-state of each IT domain.
Vendor audits avoided.
Contracts amended and vendors spoken to.
Communication with management on achievable synergies and quick wins.

Activities

Outputs

4.1

Identify initiatives necessary to realize the application end-state.

4.2

Identify initiatives necessary to realize the end-state of IT processes.

4.3

Identify initiatives necessary to realize the end-state of IT staffing.

IT Integration Roadmap Tool

4.4

Prioritize initiatives based on ease of implementation and overall business impact.

4.5

Manage vendor relations.

About Info-Tech

Info-Tech Research Group is the world’s fastest-growing information technology research and advisory company, proudly serving over 30,000 IT professionals.

We produce unbiased and highly relevant research to help CIOs and IT leaders make strategic, timely, and well-informed decisions. We partner closely with IT teams to provide everything they need, from actionable tools to analyst guidance, ensuring they deliver measurable results for their organizations.

What Is a Blueprint?

A blueprint is designed to be a roadmap, containing a methodology and the tools and templates you need to solve your IT problems.

Each blueprint can be accompanied by a Guided Implementation that provides you access to our world-class analysts to help you get through the project.

Table of Contents

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Guided Implementation 1: M&A Overview

Call 1: Introduce project steps and assess member fit
Call 2: Gain executive buy-in for IT involvement in M&A due diligence

Guided Implementation 2: Due Diligence

Call 1: Determine the current state of the acquiring and target organization
Call 2: Reconcile existing license agreements to determine potential benefits, obstacles, and M&A synergy plan variance

Guided Implementation 3: Pre-Integration

Call 1: Determine the current state of each IT domain in the target organization
Call 2: Determine current state of each IT domain in acquiring organization
Call 3: Design the technology end-state of each IT domain

Guided Implementation 4: Integration

Call 1: Build an action plan to deliver operational imperatives and quick wins
Call 2: Build initiatives to close gaps and redundancies between the end-state and current state
Call 3: Execute on roadmap