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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.
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.
- Decentralized Cost Management: You cannot optimize 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 unoptimized resources with no ROI.
Immediate FinOps Actions for a Successful Merger
To gain control quickly, focus on communication, consolidation, and clarification. These short-term actions are crucial for setting the foundation of your FinOps for M&A strategy.
- Communicate Broadly: Inform your Finance department, all AWS users, and the acquired company’s team about your plans and goals for cloud cost consolidation.
- Consolidate AWS Discounts: Instruct the AWS team to apply the highest available EDP discount from the group to all accounts.
If the combined spend grows significantly, consider renegotiating the EDP.
If no EDP exists, start negotiations immediately. - Create an Account Inventory: Build a complete inventory of all AWS accounts, including ID, name, root e-mail, purpose, and the related business unit or cost center.
- Archive Old Cost Reports: Before merging, export cost and usage reports from the old organizations for historical and audit purposes, using your preferred breakdowns.
- Merge AWS Organizations: Systematically move each sub-account from the old organization into the new primary billing organization.
Once complete, invite any former billing accounts into the new billing structure. - Enable Centralised Savings: Activate reservation and savings plan sharing across all linked accounts to maximise overall commitment usage.
- Standardise Reporting: Use amortised cost view across all reports to avoid misallocation and misleading spikes in spend.
- Clarify Financial Logistics (International):
• Be mindful of VAT obligations and define which entity pays what.
• Avoid unnecessary currency exchange. - Provide Finance Access and Explain the Billing Structure: Give the Finance team access to the new billing console and walk them through the updated billing structure and billing entities.
- Ensure Visibility Across Sub-Accounts: Enable billing data access for individual sub-accounts so each team can track and manage their usage and costs accurately.
- Activate Cost Allocation Tags: Ensure your organisation’s required cost allocation tags are active in the new billing account to support accurate tracking and chargebacks.
- Update Account Contacts: Verify and update the contact details, legal addresses, and alternate contacts on each AWS account to ensure valid communication and compliance.
- Involve Your Technical Account Manager (TAM): Engage your AWS TAM early. They can help identify available credits, custom optimisation programmes, and assist with architectural planning.
Long-Term FinOps Strategy Post-Acquisition
Once the initial consolidation is complete, the focus should shift to creating a sustainable and scalable FinOps culture.
- Consolidate Tagging Models: Unify your tagging strategy across all accounts. Tag keys should be company-agnostic to ensure they remain relevant through future changes.
- Utilize Cost Categories: Implement AWS Cost Categories to create high-level classifications of your spend, and apply them retroactively to historical data for consistent reporting.
- Unify Tooling & Rituals: Consolidate cost management tools to reduce overhead. Establish regular cost management rituals, such as assigning cost center owners and conducting reviews for anomaly detection, business unit profitability, and waste reduction.
- Forecast and Budget: Implement formal processes for creating cloud budgets and forecasts based on the new, unified data.
- Consolidate Other Vendors: Inventory all other COGS vendors (e.g., observability, security tools) and 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
Importantly, successfully merging AWS environments during an acquisition isn’t just about connecting accounts; it’s about setting up the foundation for long-term visibility, efficiency, and control. These immediate FinOps actions help you establish structure early, 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, from tagging discipline to spend ownership and forecasting. This is a pivotal moment to reset your cloud governance for scale.
Ready to turn your cloud merger into a cost advantage?
Let’s build a FinOps strategy tailored to your post-acquisition reality.