Open Source Audits in Merger and Acquisition Transactions: Get the Free Ebook
Sam Dean | 12 February 2018
The influence of open source software on every aspect of business has been on the rise for years, and it should come as no surprise that its influence during merger and acquisition (M&A) transactions has grown as well. In particular, open source audits are part of required due diligence in M&A or initial public offering (IPO) processes. Not only do such audits highlight potential instances of copyright infringement, but they give buyers and investors a landscape view of important open source components in their target’s technology stack.
These issues and more are covered in-depth in a new ebook, Open Source Audits in Merger and Acquisition Transactions, from Ibrahim Haddad and The Linux Foundation, which provides an overview of the open source audit process and highlights important considerations for code compliance, preparation, and documentation.
Today’s software products and technology stacks incorporate many open source components, and the implementation of these components can mean complex licensing and inter-dependency issues. Part of the goal with a proper source code audit is to avoid unpleasant surprises post-acquisition. Source code scanning tools have the ability to discover and match snippets of open source code that have been incorporated within software tools and platforms. In addition, these tools can identify modifications to open source code that developers may have deployed.
“Every M&A transaction is different, but the need to verify the impact of acquiring open source obligations is a constant,” writes Haddad. “Open source audits are carried out to understand the depth of use and the reliance on open source software. Additionally, they offer great insights about any compliance issues and even about the target’s engineering practices.”
Haddad also notes that open source audits can expose obligations. “Open source licenses usually impose certain obligations that must be fulfilled when code is distributed,” he notes. “One example is the GNU General Public License (GNU GPL), which requires derivatives or combinations to be made available under the same license as well. Other licenses require certain notices in documentation or have restrictions for how the product is promoted.”
According to Haddad, there are three common types of open source audits that are performed in M&A situations:
- Traditional audit, in which the auditor gets complete access to all the code and executes the audit either remotely or on site.
- Blind audit, in which the auditor does the work remotely and without ever seeing the source code.
- “Do It Yourself” audit, where the target company or the acquirer performs most of the actual audit work themselves using the tools with the option for a random verification of results from the auditing company.
Is a merger and acquisition scenario the only time an organization should consider an open source audit? No, regular audits can provide much value, and companies such as Black Duck Software have specialized in doing them in many types of business scenarios. “While it’s undeniable that an open source audit is essential before any successful M&A or IPO, it’s no less important as part of a software team’s regular operations,” notes a blog post from White Source Software. “Put it this way, if you have license compliance or security issues affecting your open source components, isn’t it better to identify and deal with those issues sooner rather than later?”
Many important issues arise during audits, including potential security threats and lapses in version control. Everything you need to know, including recommended practices and mistakes to avoid, can be found in this ebook.
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