A recent analysis by financial software firm Intralinks predicts that, following a strong first half, 2015 stands to set an all-time record for global M&A activity. According to the company’s “Deal Flow Predictor” tool – which tracks deals that are in preparation or have reached due diligence – we’ll see an 11 percent increase in M&As relative to 2014; the previous high mark had been 2007. Consumer products, technology, retail, media and real estate will be particularly active, the firm expects.
While M&As will keep investment bankers and, in some cases, regulators extremely busy, any firm involved in the acquisition, integration or divestiture of operational entities should be alert to a less visible side effect – an increased risk of an audit of software licenses and assets. The fact is, the disruption, upheaval and confusion accompanying M&A activity often wreaks havoc with an enterprise’s software licensing portfolio. Tracking licenses and users and keeping up with new agreements and version upgrades – a challenge under the best of circumstances – can become overwhelming during an M&A integration. Asset management discipline, meanwhile, is often pushed to the back burner of operational priorities during a merger.
And don’t think nobody is paying attention. Not to put too fine a point on it, but an M&A to a software vendor is like blood in the water to a shark. Whether prompted by M&As or other red flags, software firms are becoming increasingly aggressive about using audits as a revenue stream. In many cases, customers are significantly out of compliance, ill-prepared to respond effectively and potentially liable for hundreds of millions of dollars in fines and penalties.
