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Maximizing SQL Server ROI in M&A

The Hidden Goldmine: SQL Server Due Diligence in Acquisitions

Whenever I’m chatting with folks in the investment world, especially those eyeing product or “… as a service” companies that use Microsoft SQL Server, I’ve realized there’s a real need for clear, actionable insights on what to look for in a SQL Server environment. It’s not just about the nuts and bolts; it’s about understanding the broader picture. Helping maximize the ROI on the deal and ensuring the expenses post-acquisition doesn’t sink the entire deal. Not just that – but add in security/ransomware/reliability/data protection/etc. No one wants to acquire that kind of a headline generator. Let me walk you through it.

The Unexpected E-mail and the Opportunity it Brings

I’ve been consulting for over 12 years, and I still get a thrill and, yes, a bit of anxiety from unexpected turns. Here’s one familiar situation we bump into at Straight Path: A long-standing DBA as a Service client drops the news that they’ve been bought out. Initially, it feels like the ground has shifted, and I start getting ready to send my goodbye notes to the old friends at the client. But, over time, I’ve seen many of those changes transform into opportunities. New leadership often sees the value we add, and this can lead to expanded services and stronger partnerships. This isn’t just a testament to the quality of our work but to the adaptability and value of our service model. It’s also a testament to being a “values first” company with a team that cares deeply about each other and the clients.

Understanding the Real ROI: More than Just Numbers

In the wake of acquisitions, it’s common to re-evaluate external services. And while we may seem like an ‘expense’ at first glance, we’re a significant cost-saver. Here’s why:

  1. Cost of Full-Time DBAs: A senior DBA commands a handsome salary. Factor in benefits and training, and you’re looking at a considerable cost. Now multiply that because one DBA just won’t cut it – and you better not only have one – or you’re doing them a significant disservice, and they’ll be looking soon. (NOTE: This doesn’t mean we set out to replace DBAs – quite often, we augment, teach, mentor, train, and work with DBAs. Adding a Senior touch and our tools and approach helps reduce the Jr. DBA mundane tasks. Everyone grows. But let’s face it, many firms rightly (or wrongly – usually wrongly) don’t have the DBA role covered.
  2. Our Value Proposition: We step in with senior expertise for a fraction of the DBA cost. We amplify the capabilities of your developers and architects, ensuring robust infrastructure and optimal performance. The cost is fractional, not the care/concern/ownership mentality and backing. We’re DBAs – you can’t make us not care about the databases we support.

By partnering with us, you’re not just saving on salaries. You’re investing in peace of mind and consistent performance.

Another thing we get pulled into a lot is helping these new clients perform due diligence on their subsequent purchases. I enjoy that. It’s a chance to complete our SQL Server health check, dive in, and help make an acquisition decision with eyes wide open.

Here are some tips for those performing that due diligence role on a client that uses SQL Server for their backend:

SQL Server Due Diligence: The Four Pillars

Performance Assurance

Ensuring a SQL Server environment performs at its best is vital. Lags or downtimes can ripple out, affecting various facets of the business. We’ve seen the impact on retention and ARR post-acquisition when decisions were made not understanding performance.

  • Interview the developers and support team. Where are the bodies buried?
  • Ask what performance tools they use (We love SQL Sentry from Solarwindws) – if none – would they allow you to watch with an instance or use a trusted third party to watch?
  • At the very least, grab performance counters and run a SQL Server health check to see how the database administration before now was being done.

Client Satisfaction

Are you presuming on inertia as a customer retention strategy? It works…. Until it doesn’t. Post-acquisition is a great time for clients only stuck by inertia to start looking into “just how difficult is that migration to your target’s competition going to be?”.

Make waves on clearing backlogs for features and all of that – sure. But do not forget about sustaining engineering. This is a GREAT TIME to open up the ticket backlogs, look at the performance requests – and see what gremlins are out there. It’s possible that those will point to bad architecture. It’s also possible that the answers aren’t as scary as the old guard felt – they just didn’t have the benefit you have – outside perspective.

Security and Data Protection

Ensuring the product company’s clients are well-managed ensures that the product’s reputation remains untarnished. We’re developing a security health check to add to our already robust health check process and use it with clients. Pick some methods to check. Look at contracts (obviously). Look for encryption, data protection, etc. We’ve seen it all – more than once, we’ve seen SQL Servers in the cloud wide open to the world!! We’ve seen passwords in clear text for connection strings in URLs – and we’ve traced that down to see the accounts were SA or Database Owner of the databases.

Cost Management

One of the hidden pitfalls is overspending on licenses or infrastructure. Identifying these can lead to significant savings. This is sometimes a great thing to find – you can immediately reduce ownership costs. But don’t just look briefly. Run the MAP toolkit ask to see the licenses. Yes – we’ve even seen unlicensed SQL Servers more than a few times. Finding that out post-acquisition only helps if you’re looking for a J curve because you may be paying a pretty penny for that change. Especially if they are using Enterprise and forcing it (though that is better post-SQL Server 2016, with most features of Enterprise being there in standard from a development perspective.). If you see Enterprise Edition – find out why. Does it need to be Enterprise? Depending on your migration strategy – reducing to standard could increase the bottom line right away.

Tales from the Trenches

Our experience with M&A isn’t just theoretical. We’ve been in the thick of it:

  • Deep Dives for Equity Firms: We’ve conducted thorough SQL Server health checks focusing on licensing, hardware longevity, and cost waste.
  • Spotting Costly Oversights: In one instance, we identified unlicensed SQL Servers that would’ve cost a fortune to rectify. This knowledge allowed our clients to make informed decisions and reduce post-acquisition costs.

When it comes to SQL Server due diligence, the goal isn’t just to tick boxes. It’s about understanding the landscape, the challenges, and the opportunities. It’s about making informed decisions that pay dividends in the long run.

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Article by Mike Walsh

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