Supplier Relationships and Mergers & Acquisitions in the Software Industry (eBook)

A Student Primer

Karl Michael Popp (Autor)

eBook Download: EPUB

2024 | 1. Auflage
204 Seiten
Books on Demand (Verlag)
978-3-7693-4081-5 (ISBN)

Infos

This book has been created to serve students of information systems and computer science to serve as a primer for getting acquainted with key concepts and mechanisms of software supply-chains and mergers and acquisitions. It contains scientific content, best practices as well as street smarts when dealing with these topics.Questions after each chapter allow the reader to see if the content was successfully acquired and can be applied.

Dr. Karl Michael Popp is a member of the Corporate Development, Strategy and New Growth Team in the Office of the CEO at SAP SE in Germany. In his 30 year career at large and small software companies, he has worked on over 50 strategic partnerships and 40 acquisitions and successful merger integrations as well as a few divestitures. His blog is in the top ten of "Best M&A Blogs and Websites To Follow in 2024" (feedspot.com)

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2. Foundations and definitions

This chapter introduces key terms and their definitions for this book.

2.1 Fundamentals of modeling companies

Let us look at companies from a systemic perspective as goal-oriented business systems [FeSi06].

Business systems are goal-oriented

A business system is a goal-oriented system because there are goals that the business system tries to achieve. These goals are achieved by executing business processes within the enterprise. Business processes, regardless of whether they are automated or not, consider the behavior of the business system.

Figure 4: A goal-oriented business system

Types of goals

We distinguish between goals that specify the goods and services delivered by the business system and objectives that measure business success. Figure 1 shows an example of the goals and objectives of a software vendor.

Because business systems are goal-oriented, it makes sense to include goals in due diligence. Goals drive execution in business systems, but there are also design goals that determine the structure and behavior of business processes.

The business process model takes an internal view of the business system and analyzes the structure and behavior within the business system.

Generally, two views of the behavior of the business system are used: a structure view, which shows the tasks and their breakdown, and a behavior view, which shows the execution of the tasks as part of business processes. For space reasons, this book does not deal with the structure view, but only with the behavioral view.

2.2 Behavioral View of the Business Process Model

The behavioral view shows the tasks that enable the coordination of goods, assets and services in the behavioral model.

The behavior model also contains the task decomposition that follows the business processes. This figure shows the decomposition of tasks in an example.

Figure 5: Business Process Model: Task Decomposition

Describing tasks in the behavioral model

The tasks can be described in more detail in the behavioral view than shown above. The following attributes are available from the external view of the task: Task object model, objectives, goals, task description. The task object model contains all data object types, services, goods and products that refer to a specific task. In this book, a list of data object types used to perform the task is given for each task.

Example

The task "Provide Software" is located at the supplier and sends the product "Provide Software Components" to the software provider. The task object model contains the data object types supplier, software supplier and the interaction "Provide software components".

Figure 6: Business process model: Task object model of a task

Goals of tasks

Goals describe the final state of the task, defined as a combination of states of the objects in the task object model. A goal for the task "Provide Software" is "Software is delivered".

Objectives measure properties of the final state achieved. Objectives for a "Deliver Software" task could be: "Delivery on time".

How a task is performed from an internal perspective can be described in terms of a procedure for solving a task. The procedure for solving a task ensures the final state of the task is reached with the best possible achievement of the objectives.

In this book, the questions used in the procedure for solving a task of a task are listed as examples.

2.3 Software, components and software vendors

Entitities are legal entities or persons that act as parties in a contract or license.

A software vendor is an entity that provides software and software-related services to other entities.

Software offered by a software-vendor consists of components. These can be components owned by the software vendor, open-source components, components licensed commercially from third-party entities, web services or APIs of third-party entities that are accessed. A directory of all components in a software is called software bill-of-materials (SBOM).

The on-premise provisioning model is defined by delivery of software from a software vendor to an entity. If the entity is at the end of the value chain, the entity operates the software on their premises.

The software as a service (SaaS) provisioning model provides a customer access to the software for use but the software is not delivered to the customer.

Support is a service provided by a software vendor to offer technical assistance and guidance to customers or partners.

Maintenance is a service provided by a software vendor encompassing the processes of altering and enhancing software post-deployment. The primary goals of maintenance activities are to rectify errors, enhance performance, or adjust other characteristics, ensuring the software remains adaptive to evolving environments over its lifespan.

Provisioning is the task to make software available to customers or partners either by shipping the software or by giving access to software services.

Globalization requirements are requirements for software to be used in certain countries, like availability of the solution in many languages or the use of different currencies or date formats in a solution.

Localization requirements are functional requirements for the solution to comply with country-specific rules and regulations like country-specific accounting rules or compliance requirements.

2.4 Value chain terms

A value chain between entities is a graph containing directed relationships between entities. The edges represent the delivery of goods or services, or both based on contracts or license terms or terms of services.

A supply chain is a value chain among software vendors as the entities in the value chain. Going in the direction of such relationships is going downstream, the reverse is going upstream.

2.5 M&A terms

Acquisitions are activities by a buyer entity with the goal of signing a deal to get ownership of certain assets or the shares of a target entity.

An asset deal is the transfer of assets from a target company to a buyer company for a compensation. It is used if the buyer is interested in just a few assets of the target or if the seller only wants to sell specific assets. Usually, also employees are transferred with the assets.

A share deal transfers ownership of the target company to the buyer by selling all target company shares to the buyer for a compensation.

Mergers are plans for a buyer and target entity to integrate with each other. Merger integration is the execution of such plans. A carve-out is the activity to separate a part of an entity, usually with the plan to sell the result. A reverse merger is a merger integration which result in the buyer to be integrated into the target.

Merger terms

Copyright ©2024 Dr. Karl Michael Propp

Figure 7: Merger terms

The terms horizontal and vertical mergers are often used, so let us define them. Horizontal merger means that two companies in the same industry merge. They often have similar products and might also have overlapping customer and supplier bases.

A vertical merger is defined as a combination of two companies from different industries that are connected via a cross-industry supply chain.

A deal-breaker is a fact that can make a proposed deal fail. It is usually detected during due diligence or earlier in the M&A process.

2.1 Roles in the M&A Process

The following roles are assigned to tasks in the model. Please be aware that roles are generic in nature and each role can be held by one person or by multiple persons. In smaller companies, several roles can be assigned to one person. Later in the book we will show the assignment of roles to tasks in the M&A process. While we show roles for the buyer company only, the target company needs the same roles, too.

Business owner within the buyer company

The Business owner within the buyer company is representing the receiving organization, which is the organization the target company is acquired for. The managing director of a division or of a business might be staffed for this role.

Attorney of the buyer

The Attorney of the buyer is responsible for all legal aspects of an acquisition project. The role of a buyer's attorney, is to create, discuss and review the terms of the contract.

Auditor of the buyer

An auditor is responsible for conducting financial due diligence to assess the accuracy and reliability of the financial information of the target company. The auditor's objective is to provide an independent assessment of the financial statements and identify any potential financial risks or inaccuracies that may affect the value of the target company. The auditor also ensures that the target company is following accounting standards and regulations. The auditor's findings and recommendations are then used by the acquiring company to make informed decisions about the transaction.

CEO of the buyer

The Chief Executive Officer (CEO)is ultimately responsible for the success of the transaction. He/She sets the strategic direction for the company and ensure...

Produkt-Details

• Erscheint lt. Verlag: 24.10.2024
• Sprache: englisch
• Themenwelt: Mathematik / Informatik ► Mathematik
• ISBN-10: 3-7693-4081-7 / 3769340817
• ISBN-13: 978-3-7693-4081-5 / 9783769340815