By Jorge Sukarie, President of ABES
It is possible to observe that in recent years small and medium-sized companies have increasingly participated in merger and acquisition processes. According to a recent study by PWC, the month of March of this year alone had a 19% higher number compared to the same period in 2014. This can be seen in all sectors as a positive sign, as this process accelerates business development and provides considerable expansion of the companies involved. In a merger process, two or more companies are joined in a corporate action, that is, the two or more companies become a new commercial company. Meanwhile, in the acquisition, a company becomes partially or totally controlled by another that acquires it.
Entering a merger or acquisition process is a big step and a sign that the business is thriving, however this can also be a complicated action that requires several points of attention. Normally, “due diligence” (audit) is used, which is a procedure commonly adopted by companies before mergers and acquisitions operations. In general, legal, financial and operational aspects are analyzed, seeking an overview of the company to be acquired and the identification of possible business risks.
One of the points that deserve attention in the Merger or Acquisition process is the software licensing, since it involves most of the aspects mentioned above. However, the analysis of these assets is often not given due attention, which can become a serious problem in the future. All companies depend on licensed software to run their business, regardless of the area in which they operate. The use of illegal software license programs in these cases can even generate breach of contract and interrupt or delay the unification process.
The use of regular and adequate software generates relevant financial, operational and legal impacts for companies. On the other hand, a company that uses an irregular program runs a high risk in its security, leaving its data and information, including that of its customers, vulnerable. Additionally, they demand more hours of work resulting from crashes that pirated software usually generates, and expose themselves to legal risks, including executive liability for copyright infringement, and financial losses, with fines that can reach 3,000 times the value of the software. used illegally.
All these consequences are also applied to the successor company of the business, whether by merger or acquisition. An excellent way to start analyzing software assets is to conduct a license mapping and compliance verification process. The analyzes of the licenses used should mainly focus on the existence of irregular licenses installed; licenses activated beyond what is permitted by the usage agreement; expired contracts and there is a need for renewal; licenses of the same contract allocated in more than one area, with the need to carry out their division; and, finally, verification that the license usage agreement requires developer consent for the transfer of licenses.
Although the audit is typically conducted by the buyer, it is interesting that the seller seeks to manage the software assets as a previous and continuous process, that is, as part of the business routine. Thus, by previously identifying possible contingencies, the seller can determine the action plan, take corrective measures and prevent software-related events from devaluing their company or even preventing an eventual merger or acquisition.
Continuous monitoring also allows effective management of these Assets, such as the reallocation of licenses according to the real needs of each area of the company, optimizing these resources. . In addition, actions such as contract renewals and authorization for the transfer of assets can be taken in advance.
A company with regularized software and, mainly, with an implemented software asset management process, will certainly present less risk to buyers and, therefore, higher market value. This demonstrates how important it is for entrepreneurs not to forget this point when expanding their business, through a merger or acquisition process.
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