Voted Best Answer
Apr 18, 2016 - 06:35 AM
For example, company A has a 3 year agreement with vendor X with 1 year remaining. Company A acquires company B which has their own agreement with vendor X that has 2 years remaining. Both agreements share some common products. Vendor X may not let you break an agreement mid term so in this example you need to let A's agreement run to the end of its course and then negotiate a new agreement whereby B can join once B's agreement expires and that the new volume from combining both agreements brings with it further discounting.
Another example could be company C acquires comapny D. Company D is in a 3 year earn out. It is not uncommon that in this situation the costs of moving technology for the sake of standards takes second place to maximising the earn out returns. As a result the business may remain static until the eran out period ends upon which software contracts can be renogotiated as standards are adopted.
A third scenario. company E acquires company F. They are both using Office365 but in separate tenants. it may be a requirement that F needs to move to E's tenant. There would be some project costs, but perhaps no additional licence costs or user education. If however F had been using Google then all three would need to be considered.
One final example I have seen is where the newly acquired business needs to continue to run standalone. It may be that they do not need to follow the IT standards of the new owner and therefore there is nothing to be gained by and no grounds for renegotiation of software contracts.
What I can say with some certainty is that I have only once come across an M&A situation where software licensing, technology used and transition to standards was considered as part of the due diligence. That acquisition didn't happen in the end.