November 24, 2017
    Follow the Money

    Investors discover association technology vendors

    By Ben Martin, CAE | 06/15/2017

    $700 million. That’s how much money has been invested in association technology companies in the past year — that we know about. 

    What happens right after an investment, merger or acquisition?

    There will be a lot of uncertainty among employees, customers and prospects. Predictably, the vendor will put out a press release with two main messages:
    1. This transaction will improve the products and strengthen the combined companies, and
    2. There may be some growing pains, but the transition will be smooth. 

    One of these is usually more true than the other.  

    The transition usually isn’t smooth. Change is hard; it’s not something that anyone naturally embraces. Investors may make decisions that are considered inconvenient or severe to customers. For example: 
    • Decommissioning products
    • Changing or eliminating product features
    • Releasing long-time, well-known, likable staff in favor of executives deemed to be more appropriate for the growth phase, but who may come off as strict and unhelpful by customers
    • Introducing more efficient, automated support case management procedures.

    The most common complaints tend to be about customer service. Support case management is costly. This is why you’ll find so many companies that have implemented case-deflection technologies like contextual help, wikis and peer-to-peer support forums. Perhaps because the association market is more relationship-oriented and less technology savvy than other sectors, many technology companies in the association sector offer a high-touch support experience. This is viewed by investors as highly inefficient, and is usually one of the first changes they make. 

    After an investment, investors will often replace much of the acquired company’s top brass with new management and senior executives with a history of growing companies in a similar point in the growth cycle. Normally the CEO and/or founder are required to remain on staff for a year or so to help in the transition, but they typically part ways as soon as this period is over.

    What happens in the long run?

    Usually it gets better! One of investors’ top goals is to improve product quality. With new money to spend, management will implement the best practices, hire the best people, upgrade infrastructure, and do what they’ve done several times previously at other companies to improve the product.
    As the product improves, the company enjoys some side benefits:

    1. Those customers who still dislike the new support case management system are satisfied that they don’t have to use it as often, and

    2. the product’s reputation in the market improves, helping to boost sales. 

    With a subscription to ReviewMyAMS.com (AMS reviews dating back to 2013) you can actually see reviews of AMS products that have merged with another improve over time. 

    Investors must eventually be paid back, so once the company’s valuation has risen to a point that is deemed acceptable to the investors, the acquired company is re-sold.

    What are the implications for you and the association market?

    Anticipate more mergers, acquisitions, and investments in association technology firms. Your technology vendor may be next to be merged or acquired; be prepared. 
    In the long term, the association market will see improved products. Some technology companies that haven’t received investments may be challenged to keep pace on product quality compared to those with investment money to spend. 

    Knowing that investors must eventually be paid back, expect periodic churn in the ownership and management of your organization’s technology partners.
    We’re also seeing the emergence of association technology “empires” offering a suite of products (such as AMS, LMS, online community, job board, and email management) that work together without costly integrations. This alignment runs counter to the prevailing “best of breed” approach that many association technology leaders and larger organizations ascribe to, and may not gain traction at the top of the market. But for smaller associations under-staffed in the technology department, having one vendor providing multiple technologies is attractive. 

    What should you do if your tech vendor is acquired?

    First, find out when is your next opportunity to cancel your contract. If your contract’s termination date is out several months, mark your calendar to remind yourself when it’s due. If you’re on the final approach to a renewal date, call your account representative explain that — based on what you’ve heard about other mergers and acquisitions — you’re feeling uncertain and would like to transition your contract to a shorter renewal cycle: month-to- month, three months or six months.  

    If your vendor offers a user conference, make plans to attend or send one of your staff. The relationships you’ve developed with your vendor are likely to change after an acquisition or merger. User conferences are hands-down the best opportunities to build relationships up and down your vendor’s chain of command. You’ll also get information (whether explicit or implied) from the vendor’s executives during “State of the Company” addresses that will help inform your decision-making on whether to stick it out with the merged company. 

    If you can’t attend the user conference or if your vendor doesn’t offer one, seek out introductions to newly hired executives from your legacy contacts. Realize that they are more likely to resign or be laid off after an acquisition, so you’ll want to quickly start building new relationships. 

    Finally, don’t delay in expressing concerns to your vendor’s new top brass if the level of service you’re accustomed to deteriorates after an acquisition. Study your contract’s Service Level Agreement, especially as it relates to guarantees about response time, and be prepared to call attention to them immediately if your vendor fails to meet them. It’s important to send a clear message that your organization won’t tolerate any disruption to its normal business operations. 

    Learn more

    Visit TheNIRD.org to learn more and to subscribe to a newsfeed of mergers, acquisitions, and investments in the association sector. 

    Martin is founder of TheNIRD.org.

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