Mergers and acquisitions are built on bold strategies and complex negotiations. The ultimate success of the transaction, however, often hinges less on high-powered dealmaking than on how the two parties overcome the challenges involved in unifying what are usually two different technology stacks.
Software and technology estates comprise sprawling portfolios of vendors, licences, and cloud contracts. During an M&A scenario, businesses must consider how to consolidate these without creating ballooning costs or compliance headaches. The reality is that, even without a merger, overlap between different licenses and SaaS solutions is common. Contracts, too, can stretch years into the future, and shelfware – licences and apps paid for but never used – can quietly eat into budgets.
Obviously, then, this is an issue businesses cannot afford to ignore. Employees cannot perform effectively without being able to call on digital technology that works – and, if the work behind the scenes to unify two different stacks fails, so too will the new, combined entity.
It’s not just the cost of technology that puts businesses at risk of exposure – research from PWC shows that 65% of enterprises are audited within 12 months of an M&A event. These audits can lead to penalties exceeding 20% of the acquired software spend. As auditors themselves often note, ‘where there is mystery, there is margin.’ Few business events generate more mystery than the collision of two companies’ IT environments.
In highly regulated industries like financial services, these challenges are magnified. Legacy systems often linger longer than they should, held in place by compliance requirements or integration dependencies. Businesses in these industries must ensure that their combined infrastructure meets strict audit and regulatory standards from day one.
Tech stacks, M&A and the power of clarity
If mystery drives margin for auditors, then clarity drives margin for acquirers. The winners in M&A are those who can rapidly bring transparency to their combined technology portfolios. That means conducting a full inventory of software and cloud assets, assessing contractual obligations, and identifying overlaps or unused commitments. This also means that boards and executives need to work closely with IT and technology departments to ensure there is visibility on any issues or roadblocks, so that technology decisions get made as part of the M&A process rather than as an afterthought.
With clear visibility, organisations can rationalise licences, renegotiate vendor agreements, and retire redundant systems. This results not only in cost savings but also in a stronger negotiating position with suppliers, who are often eager to secure the loyalty of a larger, merged customer. By prioritising visibility and clarity from the outset, organisations can avoid the trap of post-deal surprises and instead realise the efficiencies and synergies that investors and stakeholders expect.
Marlon Oliver is an SVP EMEA at Flexera
Read more: How to secure the stack without slowing down your entire company
