When the CFO or CIO of a mid-segment company hears that their software supplier or service provider has been acquired, many questions are sure to arise. “What does this mean for us? Should we start looking for another partner?” If I were in their shoes, I would analyze the previous actions of the new owner to find out what kind of band the partner will be joining, and then decide whether it is a good band or whether it is time to start looking for a new group.
Examine the background
Firstly I would find out where the new owner comes from – what is its background and history. I would also examine what kind of financial strength they have behind them to find out if they sound like a reliable owner and solid supplier.
Track the development journey
Secondly I would find out how they have developed their business over recent years. If they were delivering software ten years ago and they are still delivering the same software and nothing else, then I would assume that there will not be much will to develop the acquired business. Because if they don’t develop their own business, they are indirectly saying that they will not be developing their customers’ business either. That’s why I find the development journey really important.
Consider their former achievements
Thirdly I would want to find out about their strategy and about what they want to accomplish. After that I’d find out what they have done earlier to evaluate how they can succeed with their strategy.
Count the eggs in their basket
Finally I would evaluate how many eggs they have in their basket and compare it against my sourcing strategy. If you have, for example, an accounts payable department handling supplier invoices, you might need a scanning supplier, an eInvoicing supplier, a workflow supplier, a payments solutions supplier, just to take these four examples. There are many companies that can deliver only one or two of those processes. If I am about to negotiate and maintain four supplier contracts instead of one, I know for sure that it will take four times as long and I’ll get a lousier deal with each of them because I am buying with less money. If I am able to get everything from one supplier, I am getting a much better deal with less trouble.
So I would look and see what they have in their basket today, and whether they have the strategy that covers what we will need tomorrow. And if they have, then I would know that these guys are really planning for the future on our behalf as well, and we could have this supplier not only for five or ten years, but for thirty years.
In my opinion, M&A activities can generate a great band and one living proof of this is OpusCapita.
Per Åberg, director of M&A activities at OpusCapita Group and a guitarist in a heavy metal band in his spare time.
Read about OpusCapita’s development journey.