Black Duck Software Offers Technical Due-Diligence Best Practices for Streamlining Mergers and Acquisitions

Enterprise M&A Activity Surges, Spurring Demand for Open Source Software Due Diligence Processes for Qualifying and Accelerating Deals

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Black Duck Software

Jun 21, 2010, 11:40 ET

WALTHAM, Mass., June 21 /PRNewswire/ -- Black Duck Software (www.blackducksoftware.com), the leading global provider of products and services for accelerating software development through the managed use of open source software, today announced best practices guidelines for both acquirers and acquisition prospects navigating the M&A process.

According to the 451 Group, technology sector M&A spending in Q2 2010 is running one-third higher than in Q1 and on track to register the highest quarterly spending total for technology M&A since the start of the credit crisis. The 451 Group credits big deals as the main driver for 2010 M&A spending growth, with 17 deals valued at $1 billion announced so far this year.

"The recent 451 Group analysis supports what we've seen with our own customers -- cash rich enterprises are hungry for opportunities to grow, diversify and innovate by acquisition," said Peter Vescuso, Black Duck's executive vice president of marketing and business development. "Mergers and acquisitions are highly complex business transactions that can be further complicated and delayed due to software intellectual property rights, export compliance and security issues, that can come to light in the midst of a deal. Companies that apply our best practices gain transparency into their software assets so they can avoid these pitfalls and focus on other aspects of navigating M&A deals."

Black Duck Software has performed code assessment reviews in over $40 billion of M&A transactions, and M&A business for Black Duck grew by 100 percent in Q1 2010 compared to the same time last year.

The following best practices have been developed specifically to aid companies considering or entering into M&A deals:

'Know Your Code' Applies to Acquirers and Acquisition Prospects

As an acquirer, you need to know that the software you are purchasing is licensed correctly and that any proprietary intellectual property is unencumbered. You need to know of any remediation that will need to take place before you can maximize revenue from this acquisition.
As an acquisition prospect, you need to know what's in your code base and demonstrate compliance with the associated license obligations. Having policies and processes in place to manage third party code will build confidence in the acquirer, help the deal progress smoothly and avoid findings that could devalue your assets.

Audit Code Before an Acquisition

As an acquirer, you need to conduct comprehensive code audits that assure accurate valuation of software assets and mitigate the risk of unanticipated licensing, compliance, security or IP issues that could undermine future value.
As an acquisition prospect, be pro-active and thoroughly review your code in advance of a transaction. This lets you avoid surprises that might delay/derail the process or affect your valuation.

Use Automation Technology for Code Analysis

As an acquirer, especially those who conduct numerous acquisitions, you need to extend your due-diligence process to incorporate automated software code analysis as a part of your standard process. This will enable you to accurately and comprehensively inventory code origins and license obligations to uncover conflicts and compliance issues and develop a remediation strategy.
As an acquisition prospect, make automated analysis an integrated part of your software development process. Start with a policy for open source use and implement tools and processes to confirm compliance with the policy. This way you'll already have tools and processes in place that can quickly produce the information needed during an acquisition event as well as demonstrate best practices to potential acquirers, reducing their perception of risk and increasing their perception of value.

Dedicate Resources for Analysis and Remediation

For both acquirers and acquisition prospects, conducting automated code assessment is the first step. Once the results are in, leave it to code analysis and remediation experts to guide you in the resolution of any intellectual IP, export compliance, security or other issues that arise during the code evaluation process. Dedicating resources in this way will provide the best results and allow you to focus on other aspects of the acquisition process.

Additional Black Duck M&A Resources – Register for our June 22nd webinar

Black Duck will be holding a webinar on technical due diligence for M&A led by Russell Hartz of SAP's Corporate Development organization. Hartz will discuss SAP's approach, best practices and recommendations for M&A readiness.

The webinar will he held Tuesday, June 22 at 11:30am EDT/8:30am PDT. Learn more and register for Technical Due Diligence for M&A: A Perspective from Corporate Development at SAP by visiting http://www.blackducksoftware.com/news/events/2010-06-22

You can also learn more about how to make all parties involved in technology M&As aware of the importance of software component management by reading the whitepaper, The New Due Diligence: Assessing and Protecting Your Software Asset Value in Mergers, Acquisitions and Financing Rounds.

For more information on automated code analysis, visit http://blackducksoftware.com.

About Black Duck Software

Black Duck Software is the leading provider of products and services for automating the management, governance and secure use of open source software, at enterprise scale, in a multi-source development process. Black Duck™ enables companies to shorten time-to-market and reduce development costs while mitigating the management, security and compliance challenges associated with open source software. Black Duck Software powers Koders.com, the industry's leading code search engine for open source, and is among the 500 largest software companies in the world, according to Softwaremag.com. The company is headquartered near Boston and has offices in San Mateo, California, London, Paris, Frankfurt, and Tokyo. For more information, visit www.blackducksoftware.com.

Black Duck, Know Your Code and the Black Duck logo are registered trademarks of Black Duck Software, Inc. in the United States and other jurisdictions. Koders is a trademark of Black Duck Software, Inc. All other trademarks are the property of their respective holders.

SOURCE Black Duck Software