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

Be an advocate for exploring the legal entity structure of your new organization and how it relates to license agreements.

Onsite Workshop

A reactive approach to software licensing contracts post-M&A leads to:

  • Compliance risk, leading to shortfall payments and reducing synergy potential.
  • Failing to ensure technology assets are thoroughly incorporated.
  • Incomplete due diligence leading to potential for overpayment for acquisition.
  • Risk of a software audit from a vendor leading to unanticipated costs during critical integration time period.

A proactive approach to software licensing contracts pre-M&A leads to:

  • Ensuring a structured due diligence process to avoid surprises and confirming that licensing meets organizational requirements and needs.
  • Identifying licensing redundancies to realize synergies from installed software and parallel systems.
  • Easy assessment of license flexibility and scalability to understand how they will impact the organization in wake of the structural change.
  • A detailed action plan for pre, during, and post-M&A activities. Your approach needs to be centralized, straightforward, and put into play quickly.
  • The tools and strategies needed to communicate the plan and get buy-in from key stakeholders.

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.

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