Due Diligence Déjà Vu: License Compliance in Software M&A

[0:08] Welcome back to Sushi Bytes. It’s Shinobi here – going solo today. Gen, my quick-witted AI co-host, apparently got caught in a network outage. Last I checked, she was arguing with the load balancer again. So, while she’s buffering, let’s dig into something that’s very much online: the return of tech M&A – and the resurgence of open source license compliance as a top diligence priority.

If you’re on the buy side of a software acquisition, this episode is for you.

[0:38] Let’s be honest – when tech M&A heats up, so does the pressure to assess software risk. And over the last few quarters, we’ve seen a wave of acquirers rediscover a very familiar pain point: license hygiene. Because while innovation moves fast, the liabilities that come with unmanaged open source. They linger like your morning-after headache you’ll have on New Year’s Day.

[0:59] Now add AI into the mix. Copilot, ChatGPT, Claude, Cursor… wait, what’s up with all the C-names? DNS pun not intended. Anyway, these AI coding tools are embedded in dev workflows. But when code appears faster than it can be reviewed, you’re left wondering: What licenses are even in here? The answer? Usually, not the ones that were declared in the package manifest.

[1:27] When reviewing targets, diligence teams cannot simply trust the SBOM, if there is one. Those are often auto-generated from metadata. They miss:

• Modified open source code
• Snippets suggested by AI from obscure libraries or forked projects
• Or AI-generated fragments of GPL or AGPL codebases

[1:47] These hidden liabilities don’t just slow down deals – they can derail them. Especially when you’re inheriting risk that wasn’t visible on the surface. It’s kind of like buying a house and discovering the foundation is cracked. You still love the house but didn’t count on the expensive repair. You wish you would have factored that into your offer.

[2:05] That’s why a smart audit partner is critical. Not just any auditor – but one that brings deep software license expertise, real-world pattern recognition, and a playbook for fast, confidential reviews.

Here’s what that looks like:

• SCA tooling that detects modified code snippets, not just full packages. But without useless noise
• Expert analysts who read between the lines literally to flag what’s real risk, and what’s not
• Blind audits that don’t expose source code and so protect your target’s confidentiality while still surfacing real legal and IP risk – so you avoid the red tape and close faster

[2:44] In short, advanced SCA with relevant snippet detection. A team of experienced auditors. And a confidential methodology that keeps the target happy.

[2:53] That third point is really important. With the right partner, you can do all of this fast. No source code exposure, no invasive access to private repos. Just hashed data, smart analysis, and clear deliverables.

[3:08] And here’s the kicker- when your diligence process includes proactive OSS audits, you send a signal to sellers and investors: We know what matters. It’s not just about code quality or roadmap alignment anymore – it’s about investment risk and clarity.

[3:23] So, if you’re preparing to buy a company that ships software – don’t wait to find out what’s lurking in the repo until after the deal. But if the deal is done, still bring in a partner who inspect your proverbial house for foundation issues.

[3:36] That’s it for this episode of Sushi Bytes. If you’ve got questions about OSS risk in software M&A or just want to hear Gen complain about cloud redundancy when she’s back online, subscribe and share this episode with your corporate development team.

[3:49] I’m Shinobi, reminding you that in diligence, what you don’t know can absolutely cost you. See you next year! Have fun and be safe out there.