Beyond financials: the critical role of SAM in M&A

Recently, I participated in a client workshop tied to an enterprise agreement renewal. During the session, an unexpected issue surfaced. The organisation had recently acquired another company – only to discover, after the deal was completed, a software licencing shortfall approaching $1 million. The exposure came primarily from SQL Server, and it hadn't been identified during due diligence. This isn't an isolated case. And it highlights a gap that organisations continue to underestimate. In this blog post we look at the critical role SAM plays during M&A or divestiture due diligence to avoid the unexpected.

The overlooked risk in M&A and divestiture

In most mergers, acquisitions and divestitures, due diligence is heavily focused on financial performance, legal exposure and potential revenue synergies. These are, of course, critical. However, software licencing – one of the largest IT cost categories in any organisation – continues to be assessed too late in the process, or not at all.

In its report Avoid Unexpected M&A Software Costs With IT Due Diligence, Gartner® states: "Organisations considering the purchase of an acquisition target (aka buyers) may incur substantial and unexpected costs if a target's software contracts are not acquisition-ready."¹ The same research notes that relicencing costs can run "into the millions and even tens of millions of dollars, depending on the organisation's size."¹

Yet despite the scale of the risk, only 35% of organisations include their IT contracts teams during the due diligence stage, according to the Gartner® 2023 Mergers and Acquisitions Survey.²

Why software asset management matters

This is where software asset management (SAM) becomes essential. When introduced early in the M&A or divestiture lifecycle, SAM provides much-needed visibility into what software is deployed, what licences are owned, where compliance gaps exist and – crucially – whether those licences can actually be transferred to a new entity.

That last point is often misunderstood. Many organisations assume licences automatically transfer with ownership. They don't.

In IT Vendor M&A: Proactively Negotiate Terms to Protect Your Organisation, Gartner® observes: "When an IT vendor is sold or sells its product to another vendor, the acquiring vendor attempts to govern usage by terms that are beneficial to them and will try to move clients to new contract terms."³ The same principle applies when the customer is the one doing the acquiring – contract terms, transfer rights and transitional use rights all need to be scrutinised.

In the case I mentioned, the company had a managed service with SoftwareOne, yet the M&A decision was made at board level without involving the SAM team. As the client later explained, it was simply "above my pay grade." That disconnect – between strategic deal-making and operational software management – is precisely where the risk lives.

From risk mitigation to value creation

SAM's value in M&A extends well beyond compliance. Post-acquisition, organisations frequently inherit overlapping applications, redundant contracts and misaligned licencing models. One company may use Canva; the other, Adobe Express. Both serve the same function. Without a structured approach, these inefficiencies persist – diluting the anticipated synergies of the deal.

In Achieve M&A IT Cost Synergies by Creating a Plan for Vendors, Gartner® notes: "Companies expect at least 20% of total mergers and acquisitions (M&A) cost synergies from IT, much of which will come from vendors. These cost synergies are not realised without proactive strategies to accomplish them."²

SAM enables organisations to rationalise their software portfolio, eliminate duplication and align licencing with actual business needs. A larger combined user base can also unlock better pricing tiers and negotiation leverage with vendors – turning what was a cost risk into a genuine value opportunity. And it's not just about on-premises software. Cloud spend falls squarely within SAM's remit, and as SAM and FinOps continue to converge, the scope for optimisation only grows.

The divestiture dimension

Divestitures carry their own distinct challenges. When selling a business unit, organisations need to ensure they have the transitional use rights from third-party vendors to continue providing IT services during the separation period.

In Save Millions in M&A-Driven Software & SaaS Negotiations, Gartner® highlights that "organisations that pre-negotiate M&A terms into their software and SaaS contracts can reduce their M&A-related licencing costs by 40% to 50% compared with those that do not."⁴ No-one can read the future, and how things may turn out so having an approach that covers an organisation for unexpected eventualities can only be a good thing.

Transitional use rights, licence transfer rights and audit clauses all need to be addressed proactively – ideally well before any deal is on the table. Gartner® research also warns that "M&A activity can trigger licence audits, which vendors use to secure large settlements that can often run into the millions of dollars."⁴

Embedding SAM into the M&A playbook

The takeaway is straightforward: software should be treated with the same level of rigour as financial and legal assets during any merger, acquisition or divestiture. Organisations that embed SAM into their M&A playbooks are better positioned to control costs, reduce risk and accelerate integration.

At SoftwareOne, we support organisations across the entire M&A lifecycle – from pre-acquisition assessments and due diligence through to licence optimisation, vendor negotiation and post-merger integration. Our role is to ensure that software licencing is never the surprise that derails your deal.

Because ultimately, M&A success is not just about what you acquire – it's about what you inherit.

By combining SAM expertise with practical execution, SoftwareOne helps organisations avoid costly surprises and make more informed decisions during mergers and acquisitions.