Merger & Acquisition Planning

One of the first activities after completion of a divestiture, merger or acquisition (“M&A”) is consolidating and eliminating contracts and redundancies, and software licensing is no exception. Microsoft contract language states that they “will work in good faith” with you for M&A. Microsoft sellers prefer waiting until contracts expire before making changes so they can keep revenue in their geography. This slows down the process and leaves money on the table, especially where one contract is better than another.  

Compliance becomes a priority. The software industry’s track record, Microsoft’s included, is to audit shortly after the deal is complete, adding unbudgeted costs to a transaction. The buyer may initiate escrow claims for licensing gaps, even when the buyer has licenses or use rights that could address compliance needs for the acquisition. Overarching contract terms, especially those in the Microsoft Server & Cloud Enrollment (SCE), may dictate that newly joined organizations buy licenses even when they have them in another contract. 

Private Equity firms are especially keen on optimization efforts with a focus on efficiencies, standardization and cost elimination. Portfolio Companies, having previously held their own contracts and defined their licensing needs, may find themselves at odds with or spending more due to the parent company’s demands.