Four Steps to Assessing Software Value in an M&A

Mergers and AcquisitionsIf there is one time when business value is front and center in a conversation, it is during a merger or acquisition process.  The acquiring company wants to know the true value of the company it’s acquiring and the company being acquired wants to prove its value as a viable option for acquisition.  In the case of a merger, both companies have these same two concerns – what is their real value and what is the value of the company with which they are potentially merging?

In today’s organizations, technology, and more specifically, software is an aspect that needs to be carefully assessed to determine its value to the M&A deal as an asset or potential liability (i.e. requiring significant upgrades or maintenance or performing poorly).     

To begin the evaluation process, I recommend looking at the software in relation to the business functions of the target company.  Is the software unique to the company’s line of business or is it used for a business function that is common between the two organizations (i.e. HR, payroll, CRM).  Most likely, the software that is performing the same function in both companies will be of little business value to the acquiring company as they will choose to keep their existing software. 

However, a software solution that is unique to the target company could have tremendous value.  The challenge is that the acquiring company may not be familiar with the software and have a limited understanding of its value or the risk associated with that software.  In addition, if there are only a few individuals who understand how to use and maintain the software (especially with proprietary software) there is a risk that they will not remain at the company and as a result there will be no knowledgebase to maintain and/or enhance the software. 

I recommend taking four key steps during the acquisition process to determine the value of the target company’s software:

1. Software Asset Due Diligence (ADD) – determine how the target organization relies on the software.
2. Software Asset Risk Management (ARM) – assess the risk involved in transitioning to the target organization’s software.
3. Software Asset Maturity Analysis (AMA) – determine the future ROI for the acquired software.
4. Software Asset Integration Management (AIM) – analyze how to integrate the acquired software into the current environment. 

A software assessment needs to be an integral part of the M&A process – no matter what end you’re on.  It can no longer be an after-thought.  Software can provide significant value or pose a huge risk for an organization and that needs to be determined up front. 

I’m always interested in hearing from others about your experiences on how your organization has handled the software assessment process during a merger or acquisition.  What lessons have you learned?


Mike Harris
CEO

Written by Michael D. Harris at 05:00
Categories :

David Consulting Group Ltd., Trading as DCG Software Value, Accepted as a G-Cloud 8 Supplier

DCG Software Value, a global provider of Function Point Analysis, software estimation, and Agile support services, has officially been accepted as a supplier for the Crown Commercial Service (CCS) G-Cloud framework, G-Cloud 8.

The G-Cloud framework aims to make it easier to procure information technology services via approved public sector organisations. Those interested can use the “Digital Marketplace” to search for services that are covered by the G-Cloud frameworks. Suppliers are carefully evaluated during the tender process and pre-agreed terms and conditions offer customers sound contractual safeguards. The agreement is fully EU compliant, saving customers the time and money associated with conducting their own procurement exercise.

The goal of DCG Software Value is to make software value visible to those both in IT and on the business side of the organisation. They have successfully helped a number of organisations in the UK to achieve such goals. The company will continue to work with public organisations via G-Cloud 8, helping to implement improvements that will make software development deliver value more cost effectively. 

The company’s available services include:

  • Functional Sizing
  • Vendor Estimate Validation and Estimation On Demand
  • Scaled Agile Framework
  • Training – Functional Sizing and/or Estimating
  • AgilityHealth Radar
  • Agile JumpStart

Public sector buyers are can find DCG’s services via the Digital Marketplace. More information about DCG Software Value is available here.

About DCG Software Value
DCG Software Value is a global provider of Function Point Analysis, software estimation, and Agile support services. Since 1994, companies of all sizes who depend on their software have relied on DCG to foster improved decision making and resource management and to quantifiably impact their bottom line. DCG maintains offices in Newcastle (UK), Philadelphia, and Colorado. DCG Software Value is the operating name of Objective Integrity, Inc., a Pennsylvania corporation.

For more information, visit www.softwarevalue.com.

About Crown Commercial Service
The Crown Commercial Service (CCS) works with both departments and organisations across the whole of the public sector to ensure maximum value is extracted from every commercial relationship and improve the quality of service delivery. The CCS goal is to become the “go-to” place for expert commercial and procurement services.

For more information, visit www.gov.uk/ccs.

Written by Default at 05:00
Categories :

"It's frustrating that there are so many failed software projects when I know from personal experience that it's possible to do so much better - and we can help." 
- Mike Harris, DCG Owner

Subscribe to Our Newsletter
Join over 30,000 other subscribers. Subscribe to our newsletter today!