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Introduction: The role of FinOps in SaaS M&A
For many SaaS vendors, growth by merger and acquisition (M&A) presents significant challenges and interesting opportunities. A critical, often overlooked, area is cloud cost management. As a result, without a solid strategy, the complexities of merging different cloud environments can lead to uncontrolled spending. This article provides a practical guide to FinOps for M&A, sharing real-world actions to effectively manage cloud costs in a dynamic, multi-entity environment.
For SaaS companies navigating acquisitions, having a structured FinOps strategy in place is crucial to maintain visibility, control, and alignment across teams.
In essence, the core principle of FinOps is to bring financial accountability to the variable spend model of the cloud, a practice that becomes essential during an acquisition.
Why FinOps matters during acquisitions
For SaaS companies navigating acquisitions, having a structured FinOps strategy is crucial. Specifically, it helps maintain visibility, control, and alignment across teams. In essence, the core principle of FinOps brings financial accountability to cloud’s variable spend model. This practice becomes essential during an acquisition.
A merger brings new opportunities, but it also brings a mix of cloud environments, billing structures, and cost practices. This moment of transition is where FinOps becomes essential, helping both teams gain clarity, align on spend, and build a unified approach to cloud cost management from day one.
Key FinOps challenges in an M&A
When one SaaS business acquires another, it inherits a new cloud infrastructure with its own set of practices and agreements. This creates immediate FinOps challenges that must be addressed to avoid blind spots and financial waste.
- Decentralised Cost Management: You cannot optimise what you don’t see. Separate teams often lead to blind spots.
- Multiple Billing Entities: This creates accounting overhead, invoice processing delays, and tax complications.
- Manual Instance Management: Inefficient management of Reserved Instances (RIs) and Savings Plans leads to reduced coverage and utilisation.
- Separate Billing Accounts: A fragmented view of costs makes a comprehensive overview unnecessarily complex.
- Disparate Pricing Agreements: Failing to consolidate accounts means you are underutilising potential rate optimisations and volume discounts, like the AWS Enterprise Discount Program (EDP).
- No Established Cloud Cost Hygiene: Without clear standards, large amounts of money are often spent on idle or unoptimised resources with no ROI.
Immediate FinOps actions for a successful merger
To gain control quickly, focus on three key areas: communication, consolidation, and clarification. These short-term actions are crucial for setting the foundation of your FinOps strategy.
Communication and planning
- Communicate Broadly: First, inform your Finance department about your plans. Then, notify all AWS users and the acquired company’s team about cloud cost consolidation goals.
- Create an Account Inventory: Build a complete inventory of all AWS accounts. Include the ID, name, root email, purpose, and related business unit or cost centre.
- Involve Your Technical Account Manager (TAM): Engage your AWS TAM early. They can help identify available credits and custom optimisation programmes. Additionally, they assist with architectural planning.
Consolidation and discounts
- Consolidate AWS Discounts: Instruct the AWS team to apply the highest available EDP discount to all accounts. If the combined spend grows significantly, consider renegotiating the EDP. Otherwise, if no EDP exists, start negotiations immediately.
- Archive Old Cost Reports: Before merging, export cost and usage reports from the old organisations. Use your preferred breakdowns for historical and audit purposes.
- Merge AWS Organisations: Systematically move each sub-account from the old organisation into the new primary billing organisation. Once complete, invite former billing accounts into the new structure.
Savings and reporting setup
- Enable Centralised Savings: Activate reservation and savings plan sharing across all linked accounts. This maximises overall commitment usage.
- Standardise Reporting: Use amortised cost view across all reports. Consequently, this avoids misallocation and misleading spend spikes.
- Activate Cost Allocation Tags: Ensure your organisation’s required cost allocation tags are active in the new billing account. This supports accurate tracking and chargebacks.
Financial and administrative tasks
- Clarify Financial Logistics (International): Be mindful of VAT obligations. Define which entity pays what. Additionally, avoid unnecessary currency exchange.
- Provide Finance Access: Give the Finance team access to the new billing console. Then, walk them through the updated billing structure and entities.
- Ensure Visibility Across Sub-Accounts: Enable billing data access for individual sub-accounts. This way, each team can track and manage their usage and costs accurately.
- Update Account Contacts: Verify and update contact details on each AWS account. Include legal addresses and alternate contacts. This ensures valid communication and compliance.
Long-term FinOps strategy post-acquisition
Once the initial consolidation is complete, shift your focus to sustainability. The goal is to create a scalable FinOps culture.
Standardisation and governance
- Consolidate Tagging Models: Unify your tagging strategy across all accounts. Tag keys should be company-agnostic. This ensures they remain relevant through future changes.
- Utilise Cost Categories: Implement AWS Cost Categories to create high-level classifications of your spend. Furthermore, apply them retroactively to historical data for consistent reporting.
Processes and tooling
- Unify Tooling & Rituals: Consolidate cost management tools to reduce overhead. Establish regular cost management rituals. For example, assign cost centre owners and conduct reviews for anomaly detection, business unit profitability, and waste reduction.
- Forecast and Budget: Implement formal processes for creating cloud budgets. Base forecasts on the new, unified data.
- Consolidate Other Vendors: Inventory all other COGS vendors (e.g., observability, security tools). Then, look for similar consolidation opportunities.
The financial impact of a strong M&A FinOps strategy
The results of this structured approach to FinOps for M&A can be substantial and directly impact the bottom line. Our experience has shown:
- An immediate increase of 2% in EDP discount across all accounts.
- A 5% total cost reduction after initial “waste disposal” and rightsizing efforts.
- A 10x reduction in the budget needed for cost management tooling.
- A 38% (and growing) effective savings rate on compute costs across the board from shared RIs and Savings Plans.
Final thoughts
Successfully merging AWS environments during an acquisition requires more than just connecting accounts. Rather, it’s about setting up the foundation for long-term visibility, efficiency, and control.
These immediate FinOps actions help you establish structure early. Consequently, they reduce surprises later and align both Finance and Engineering around a unified cloud cost strategy.
Moreover, even after the technical merge is complete, continue to revisit your FinOps maturity. This includes everything from tagging discipline to spend ownership and forecasting. Indeed, this is a pivotal moment to reset your cloud governance for scale.
Ready to turn your cloud merger into a cost advantage?
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