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10 Reasons You Should Care about Software Mergers & Acquisitions

Written By: TEC Staff
Published On: November 29 2007

Like it or not, the enterprise software industry shifts constantly as vendors merge or acquire one another. But how does it affect you? Here are ten reasons.

1) Acquisitions can wreak havoc if you’re in the middle of an implementation
Does your ERP system provider have your concerns at heart during the vital implementation phase? Is it responding to your questions? Is your implementation on the high-priority list? If it's in the midst of an acquisition or merger process, you’re probably not even on its radar screen.

2) Product discontinuation
After a merger or acquisition, vendors tend to discontinue (stabilize, kill, or however you'd like to phrase it) products. They embark on a forced-march upgrade to future (fused) products.

3) Third party alliances
Consider your current vendor's third party alliances. Will those alliances persist after an acquisition? What if the new owner has an equivalent offering? (See P.J. Jakovljevic's article, Is There a Street Corner for a Vendor-neutral Third Party Support and Maintenance Provider?)

4) Organizational confusion
The work required to integrate companies after a merger or acquisition is significant. During the integration period the newly formed company's processes may be thrown into disarray while employees and management adapt to their new organizational model.

5) New source of innovation (a plus!)
Is your vendor focusing on its core business? Competitors are always developing innovative ways to compete—many software vendors acquire other companies as a primary source of new innovation. This can be a great benefit to you. Another thing, merging parties may have a greater combined R&D budget.

6) Negotiate a sweet deal (another plus!)
In the period following a merger or acquisition, the new entity is often anxious to please its install base (you)—after all, the install base is generally a motivating factor for the acquisition in the first place. If you're negotiating purchase of a product that is the result of a merger, you may suddenly find that you have more leverage than you thought. After all, the vendor's competitor is negotiating from a position of perceived stability, if not strength.

back to the doom and gloom...

7) Changes and delays in the product development roadmap
The roadmap that one company plans for its future product development takes into account many of the requirements of its user base. When the company merges with another or is acquired, its product roadmap may change in ways that you didn't expect. However some vendors take great efforts to make product strategies cohere. (See number 2)

8) Conducting your own upgrades and maintenance
If your system provider goes under without a trace, you may find that your product is no longer supported. Good luck with your IT department, there.

9) Loss of knowledgeable support personnel
Sometimes a clash of corporate cultures resulting from a merger or acquisition causes employees to leave the new company. In many cases mergers and acquisitions also involve layoffs. While some positions may be redundant, the new entity will lose knowledgeable staff. How will this affect your interactions with the new vendor? On the flip side, you may end up with a larger or more dedicated support team as the vendors combine forces.

10) New owners may not be sensitive to your management vision
So you want to scale up over 10 years to ensure your systems are in lockstep with your growth plans? Think again. The acquiring party may not feel that it’s necessary to consult you before committing you to system growth.

Key takeaway, it's not all bad. Even the items that may cause concern can be addressed. Just proceed with caution and be sure to evaluate your alternatives.
 
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