Selecting an enterprise or SaaS product for a bank is a complex task. You’ve involved multiple decision-makers, sat through endless demos, negotiated the terms of the agreement, and finally implemented the product — in total, a process that can span many months.
You do all of that … and then learn that your chosen vendor has been acquired. Sigh.
The reasons for software vendor mergers and acquisitions are varied. Sometimes the products complement each other and the two companies join forces to provide a more comprehensive solution. Sometimes a large vendor gobbles up a smaller vendor to acquire a sleek new technology (or eliminate the competition). Other times an acquisition is nothing more than a change of ownership.
Any of these scenarios can have a lasting impact on your bank’s relationship with that vendor. There are some steps you should take immediately upon learning of a merger or acquisition to determine if the vendor will continue to be the right fit.
Step 1: Review your contract
Not every company announces mergers and acquisitions in the same way. Some will send out press releases; some will announce on social media. Sometimes it might happen quietly, especially if the vendor is nervous about how customers will react.
As soon as you get wind of the acquisition, review your contact. You want to understand the length of the agreement and the notice period to cancel if you decide that you don’t want the relationship to continue. More than likely the agreement will not allow you to back out in the event of a merger or acquisition, but you should at least understand the contract terms.
Many contracts are designed to auto-renew unless you provide notice of cancellation. If that’s the case, inform your vendor that you will be exploring your options and that you do not want to auto-renew. If you need to end the agreement, you want to make sure you have followed the requirements to provide proper notice.
Step 2: Get on the phone with your account manager
Your account manager or relationship manager should be familiar with your bank’s usage of the product and (in theory) have some insight into the internal workings of the newly merged organization.
Schedule a time to talk with your account manager, but be very skeptical. Some account managers may be well-trained in managing customer expectations (i.e., reassuring you that everything is fine). Others might “spill the tea,” as it were — particularly if they are personally wary of the end result of the merger.
Ask your account manager some very pointed questions:
What prompted the merger or acquisition?
What are the plans for the future of the product?
Will product offerings or pricing change?
Will a conversion or migration of data to a new platform be required? If so, when will this occur?
If your account manager doesn’t know the answers, request a follow-up or ask to be directed to someone else. Don’t accept unanswered questions or skirted/vague answers.
The product’s future might be unknown at the time of acquisition. If that’s the case, circle back with your account manager in about three months’ time and ask again.
Step 3: Understand new ownership
Presumably, you choose vendors because they understand your needs as a community banker. A change in ownership can bring in a new (fresh) perspective — or it might mean that the company’s priorities will change.
Mergers that happen as a result of complementary products are the least concerning. You’ll likely gain new functionality and, unless the two companies have an opposite approach to customer service, business will continue as usual.
But when large companies acquire small companies, a lot can change. You may lose the personal touch of a customer support team or find that the large company wants to move the product upmarket and it’s no longer a good fit.
Do your own research and look at online reviews or call up existing bank customers of the larger company and talk to them. You’re looking for information about product innovation and customer experience: The due diligence that you would do if you were selecting this vendor of your own accord.
Finally, sometimes companies just sell. This could be the result of a venture capital investment or an offer that simply couldn’t be refused. In this case, you’ll want to understand the new owners. Do they have the requisite banking knowledge to drive the company forward? Or is it purely a financial transaction in which the new owners are looking for the highest ROI?
Step 4: Follow the company and its employees
Your investigation shouldn’t end with talking to your account manager and researching the company. After all, that information only reflects where the company is at today, not where the company is headed.
Pay attention to product announcements (or lack thereof). Are you still receiving new features at the same cadence? A slowdown may indicate internal turmoil as the merged companies learn to work together. Some changes are to be expected in the beginning, but ongoing product enhancement delays are a red flag.
Watch LinkedIn and other social media sites. Employees of the company may voice their excitement about the new opportunities of the acquired company. Or you may see announcements of layoffs or departures. If employees are leaving in droves, you might be concerned about the overall stability of the product, since a lack of institutional knowledge will create a bumpy road.
Step 5: Investigate your options
No matter what the circumstances, a vendor merger or acquisition should prompt you to at least explore alternatives. You should be doing regular reviews of your vendors and products anyway, as your needs will likely change over time. Many banks wait until it is close to contract renewal time to perform such a review, but a change in your vendor’s ownership provides a natural opportunity to look at alternatives.
This may not happen immediately, but it should be on your mind — especially as details about the internal changes emerge. In the meantime, you can start talking to other vendors, attend demos, and gather information about pricing. Even if you decide that your current vendor is still the best option, you’ll have at least confirmed that decision.
In the end, go with your gut. Pay attention as the changes unfold. It might be that a merger or acquisition benefits your bank — in which case, great! But you also might start to see red flags that indicate that the new vendor relationship might no longer be the best thing for your bank. There will always be products that will meet your bank’s needs, and the vendor is an important part of the equation.