We are living in a time of unprecedented disruption and increased innovation in the channel. While the pandemic threw a wrench in many aspects of our daily lives and business practices, it also hyper-accelerated technologies, digital transformations, and mergers and acquisition (M&A) deals.
In fact, by 2022, the level of global M&A activity involving technology providers is predicted to surpass previous highs recorded in 2018, according to Gartner, Inc. The onset of the pandemic briefly impacted the merging and snapping up of tech providers. Activity quickly bounced back in 2021 as partners, and the economy overall began to recover.
The move toward a merger and acquisition strategy can be motivated by several key goals, whether it’s a vendor snapping up a partner or a partner-to-partner transaction. A company may be looking to expand into new geographic territories, acquire new technology, or bring in new talent to the business.
A merger or an acquisition is typically a way of:
- Seeking a solution to a business problem
- Gaining expertise
- Increasing market share and value
- Acquiring intellectual property
- Gaining access to new customers
Competing and capitalizing on these kinds of opportunities can be daunting if you’re unsure of where to begin. Before diving in, define your ultimate goal and understand the ins and outs of the M&A process as you start to navigate through uncharted waters.
If you are looking to acquire (or be acquired), you should think through:
- Partner acquisition strategies
- Aspects of the partner journey
- How to deliver a world-class partner program that sets your organization apart in this competitive landscape
M&A activity between partners dealing with similar vendors or solutions requires dexterity, deliberation, and, most of all, data.
Before “setting sail,” here are some of the top misconceptions that partners have about M&A deals and helpful tools they can use to move in the right direction. Industry veterans and experts Arlin Sorensen, Vice President of Brand and Ecosystem Evangelism at ConnectWise; Nancy Sabino, Vice President of Sales and Marketing at Synetek Solutions; and Juan Fernandez, Vice-Chair of Industry Association CompTIA’s Channel Development Advisory Council, lend their insights.
Myth one: Partners are all similar, and merging two organizations isn’t hard
It’s important to accurately position your actual business value, which means EBITDA or positive cash flow in the simplest terms.
You also must analyze the line of business you’re buying to determine if it’s complimentary. Identify how the two companies will interact after the acquisition. Having a clear go-forward strategy is critical to delivering a high level of internal and external customer success.
Myth two: The primary value of an acquisition will be cost savings
Acquisitions are not about saving money on your cost of goods sold (COGS). The opportunity from well-done acquisition centers around customer value, talent acquisition, and growth. You shouldn’t cut corners on your way to success over the long haul.
The real focus needs to be on figuring out where you focus all your attention on driving the return of the combined time, talent, and treasure you now manage.
Myth three: There won’t be a culture shock
Maybe, but what they won’t love is change. The biggest surprises often relate to culture, its impact on integration, and ultimately, future success.
Do not underestimate the force that culture plays in successful M&A transactions. It must be a priority of the executive team to stay very connected to how companies come together. That means keeping a close eye on how the two entities will combine and manage different methods of handling training, enablement, and pipeline activity.
Myth four: Payment will be 100% cash
The reality is that very rarely do you receive 100% compensation upfront. Sometimes contingencies, milestones, or owner financing are necessary to get a deal across the finish line.
Not all acquisitions make dollars and “cents.” Many believe that a purchase will have a positive impact on financials. Some things to consider are:
- Will it increase your revenues?
- Will it improve or reduce your profit margins?
The numbers are as significant as the strategic portion of the acquisition. A couple of questions to ask are:
- Is it growing faster or not as fast as you?
- If you buy a company that will slow your growth, will that affect your overall valuation multiple?
Myth five: Success metrics are universal
The assets that matter are what the buyer values. You should have data organized and in order, including the relationships you’ve built over time. Why? Because you never know what will be of value to the buyer as they do their due diligence.
All data is essential: customer data, internal KPIs, revenue – more metrics than you can imagine. Data can act as a critical competitive differentiator, and now with the industry bursting with M&A activity, it can be a strategic asset. With any transaction, data can represent a rather significant portion of the value of a company. It can also reflect a company’s business model.
Myth six: Additional training won’t be necessary
When considering an M&A deal, it’s crucial to think through how you’ll integrate systems that handle your data, such as CRMs, PRMs, marketing and sales automation platforms, ERP solutions, and more. Where do you risk losing track of your assets? Where, when you combine assets, do you uncover potential opportunities?
The team being acquired will need additional training on your processes, software, and more. Utilize automated learning tracks to allow individuals to go through the training at their own pace. Bonus: automation ensures that training is standardized and allows users to go through training independently.
On that note…
Myth seven: Everything will or can stay the same
No matter how much you want things to stay the same – whether you’re staying on board, sticking around for some time, or exiting immediately – there is no way things will remain 100% the same.
You can engage investors to help with expansion or provide economies of scale when joining forces with another company. Not all roads have to include an exit, and every business owner should plan at some point to grow or go, buy or sell. Everyone must consider their long-term plans.
While you probably won’t have to leave, you may have to make concessions in your company culture. Don’t take it personally. Your M&A partner is going to have to bend a little, too.
The company you’ve spent your days building will undeniably change under new leadership. The acquirer will have their own tools, resources, and methodologies they will need to transition.
Myth eight: Buyer or sellers’ remorse is guaranteed
Everyone has a story about a lousy sale or acquisition. There is a reason for this: M&A can be unpleasant and have less-than-ideal outcomes if certain things are overlooked. But it also can be a positive experience if you’re paying attention to the essential items.
In any transaction, both parties must do their due diligence. Remorse is expected when the acquisition is focused solely on the numbers and not the business as a whole. There are many things to consider when selling, and many executives only focus on the numbers and forget the human capital.
Recognizing the big picture versus the financials is where problems can arise, but partners can avoid them. Thoroughly discuss the business as a whole as part of the transaction. Consider the path forward, look for synergies, and map out a plan on both sides to ensure that things are clear and easily communicated at closing. Transparency will go a long way to ensure the success of the overall transaction.
Whether you are looking to buy, sell, or partner with another company, every partner should first determine how they position their business. To avoid any of the above misconceptions, you must consider the implications for end-users and ensure the customer experience stays top-notch across each stage of the M&A life cycle.
Platform, systems, and processes integration is a crucial component to channel partner program growth. Here are some hard truths on how M&A impacts your partnerships:
- Merging two organizations takes time and resources
- Cost savings shouldn’t be your end goal
- Be prepared to compromise
- Not all acquisitions make dollars and “cents”
- Chances are you won’t have the same definition of value as your partner
- Your new employees will need training
- Expect change
- Remorse is only guaranteed if your intentions aren’t aligned
Ali Spiric leads Allbound’s content marketing to cultivate awareness for the ultimate PRM solution. Ali is a digital marketer that thrives in the B2B space.
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