The credit crunch has been with us for a while now, and the lack
of easy credit is starting to bite. Why is this relevant to TMT
News? And how might this affect you as an acquirer of technology
It is well known that many technology companies have 'thin'
balance sheets and are not known for the depth of their financial
resources. Because of this, many suppliers in the industry will
find it increasingly difficult to obtain access to working capital,
and this will lead to the demise of some services and software
So what can you do about it? The key is to take a more proactive
approach during this period of economic uncertainty. Set out below
is a checklist you may consider applying to your technology
Are all your suppliers cashed-up, big multi-nationals, or do
you have some smaller providers?
How many of these vulnerable suppliers provide business
critical software or services to you?
Are any of these providers asking for money upfront, payments
in advance, or in some other way showing evidence of financial
Do any of these suppliers have a customer base that is
principally in an area severely affected by the credit
Do you have a 'plan B' for each of your key
Have you checked your escrow arrangements lately? If there is
no 'plan B' supplier of software that you can readily
transfer to, you will need access to the source code if the worst
happens. Consider whether you need to verify any assertion that the
most up-to-date source code is deposited with the escrow
Are the escrow arrangements with a well known (cashed up)
Is the escrow agent here or overseas?
Have you pre-paid for a service or software that you may not
Has the impact of the credit crunch on your suppliers appeared
in your risk register, and if so, how often is this reviewed?
Overall, this is a good time for a risk health check. We all
tend to focus on the impact that the credit crunch has had on our
business, but may have overlooked the impact of this economic
uncertainty on our software or service providers. Remember it is
quite likely that they are more vulnerable than you are, so it
would be prudent to carry out your risk review as soon as
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Effects of new PPS regime on financing and supply of goods and services to information technology businesses.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).