The Sideline Offensive – Vendors Take Note

Several weeks ago we addressed the issue of vendor sustainability, with acquisition activity one of the confounding variables in the constantly shifting sands of the HR vendor community.  Many thanks to my good friend Bridget Boix of Krill Northgate for pointing me to a an article in Mergers & Acquisitions Magazine entitled, “The Sideline Offensive”.

The premise is as follows – When Company A acquires Company B, competitive firm C should have a field day by overtly targeting the best customers, employees and suppliers of both A & B, thus effectively attacking from the sidelines.  Said the article:

“The most vital area up for grabs is the combined customer base of the merging companies. As anyone who has gone through an integration process can attest, attention very easily gets diverted in a merger. It might mean customers’ calls go unreturned or maybe… pricing gets ratcheted up. Even if these scenarios don’t develop, clients may habitually think about alternatives as a precaution.” (The Sideline Offensive, M&A Magazine, page 40)

So when should such an offensive begin?  Jeff Gell of Boston Consulting Group recommends:

“The best times to strike are when deals are announced. There’s a lot of uncertainty and an initial paralysis. People can’t make decisions,” Gell says. The other time to strike, he adds, is “shortly after the close,” when the attention is focused on executing the 100-day plan. After 12 to 18 months, however, it’s usually too late to capitalize.  (The Sideline Offensive, M&A Magazine, page 40)

The larger vendors in our marketplace tend to have a fairly well established mechanism for monitoring consolidation among the niche providers.  When instability arises, prepared players may trump rising uncertainty with stability, targeted messaging and superior service.  Needless to say that both HR providers and buyers need to pay close attention to these issues.  With thousands of vendors in our glorious HR marketplace, consolidation via M&A may accelerate out of necessity versus design.

Let’s keep the conversation going.