Merger and acquisition (M&A) activity among technology solution providers, vendors, suppliers, IT distributors and technology services distributors (TSDs) leveraging channel partners has accelerated in recent years. In fact, channel media outlet ChannelE2E has tracked nearly 2,600 M&A events impacting the channel since 2019. And M&A activity is not expected to slow down anytime soon, driven by the continued search for greater scope, scale and value creation.
While partners may have grown accustomed to supplier and distributor M&A, they risk being casualties of the disruption that typically goes along with it. With these vital partnerships at stake, how should channel operations leaders manage the impact of M&A on partner programs?
To answer this question, we spoke with six industry experts – suppliers, partners and consultants. Our panelists include:
- Michelle Accardi, CEO for configuration change detection and response (CCDR) platform company Liongard
- Curt Allen, Strategic Advisor for technology advisory and lifecycle management company Bluewave Technology Group and Founding Partner for technology solution provider and distributor growth consultancy X4 Advisors
- Theresa Caragol, Founder and CEO for channel consultancy AchieveUnite
- Khali Henderson, Senior Partner at technology and channel marketing firm BuzzTheory
- Michelle Hyde, Founder and President of tech and security advisory firm Hyde Group
- Randy Jeter, Co-Founder and Managing Partner for the data-driven IT procurement and management company Procure IT
How Does a Merger or Acquisition Affect Partner Programs?
To answer the question about how M&A impacts partner programs, it helps to understand some of the drivers behind these transactions. There are many reasons that companies come together, but here are the primary ones:
- Scale — With scale comes economic benefits, such as lower costs as a result of higher volume, greater bargaining power with suppliers and even increased access to capital.
- Scope — Acquiring complementary capabilities or access to new markets can help companies improve wallet share and diversify risk.
- Synergies — This word is often code for layoffs but encompasses the larger objective of creating greater value together than is possible separately. It manifests as cost savings, revenue increases and a better balance sheet.
- Skill — Access to talent can be a major driver for M&A, particularly in tech, where there’s a known skills gap.
- Speed to Market — With technology evolving faster than ever, companies are likely to acquire other companies to gain capabilities more quickly than building them in-house.
With this context in mind, we surveyed our panel to get their views on the benefits and challenges of M&A on partner programs.
What Are the Benefits of a Merger or Acquisition for Partner Programs?
According to our panelists, the primary benefits of merger or acquisition for partner programs include:
- Boosting Mindshare & Deal Share with Distributors – “Consolidation can make two middling plays into one with significant scale with the already consolidated [distributors] and TSDs,” says X4 Advisors’ Allen.
- Scaling Program Resources – Hyde Group’s Michelle Hyde says, “The upside [of M&A] could be a more mature partner program, more resources added to the ranks to support the effort, and [better] portals or training resources.”
- Offering a Comprehensive Service & Product Portfolio – “When two companies come together, it presents a significant opportunity for partners to excel and grow,” says AchieveUnite’s Caragol. “They can become the preferred partner, capable of offering a comprehensive portfolio [to end customers].”
- Improving Channel Operations – “At the supplier level, there is an opportunity to reconcile the best of each side, including leveraging successful practices and preserving effective strategies from both entities,” adds Caragol.
- Expanding the Partner Base – Programs will benefit from adding new partner types or increasing the volume of partners to their portfolio. Liongard’s Accardi says M&A causes an “inflection of new ideas and exposure to new sets of partners to leverage them.”
What Are the Challenges of a Merger or Acquisition for Partner Programs?
While there are many benefits of M&A for partner programs, change is never easy, and there are also many challenges. Here are some of the big ones:
- Confusing Program Integration – The No. 1 challenge that partner programs must avoid is confusing integration plans for the organization and the partner programs. “Partners may be excited about the promise of a merger or acquisition, but they’ve been burned before by poorly executed transactions that have left them — and their customers — high and dry,” says BuzzTheory’s Henderson. “The last thing you want is for partners to disengage based on a false start. A well-laid integration plan with realistic phase-based timelines is paramount for setting expectations.”
- Conflicting Channel Attitudes – Hyde Group’s Michelle Hyde says one of the more challenging outcomes of M&A for partners is when the acquiring company doesn’t have a channel program or even questions the need for a channel program. Be prepared to advocate up to the C-Suite by showing the value of the partner program to the overall combined company.
- Diluting Differentiation – “If we’re not careful, we end up unraveling differentiation through merger,” says X4 Advisors’ Allen. For example, a provider known for personalized customer service may be acquired by a larger entity with a more efficient but less personalized approach. Post-merger, a core differentiation for the acquired company is gone, which risks partners’ existing base and future sales.
- Disrupting Service Delivery – Allen also says that merging companies “tend to underestimate the complexity of merging disparate [go-to-market] strategies and service delivery models.” Integrating those processes can cause significant disruption for partners and their clients.
- Keeping Provider Talent – M&A is notorious for disrupting employee experience (EX) as merging companies “trim the fat” by cutting staff, which in turn can have a deleterious effect on partner support. As a result, channel employees may feel insecure, overworked or concerned about souring partner relationships, which may cause them to jump ship.
- Cutting Program Funding – “Oftentimes, synergies in deals require looking at the funding of partner programs with a closer scrutiny for ROI, and if a hard return in partner-led growth isn’t being realized through the program, expect funding to be cut post-acquisition,” says Liongard’s Accardi. She adds that this isn’t necessarily a bad thing as it forces focus on spending money more effectively.
7 Best Practices for Managing a Partner Program After a Merger or Acquisition
How should your company effectively manage a partner program after a merger or acquisition event? We could literally write a book on the subject, but here are seven solid best practices to follow:
1. Integrate Organizations Carefully & Retain Successful Program Staff & Initiatives
First and foremost, programs should slow down after an M&A event and not immediately resort to combining program personnel and initiatives. “First, do no harm,” says X4 Advisors’ Allen. “Retain all people and programs that are successful. Be measured in realizing synergies.”
Procure IT’s Jeter echoes these sentiments, noting that it’s imperative to have operational leadership and consistency. “The best providers limit turnover and have the people, processes and systems well documented and managed, too,” Jeter says.
For better or worse, the channel is relationship-driven, so cutting channel staff to realize synergies right away can have a negative impact on partner sales and retention. “Often partners will follow their favorite channel managers when they leave one organization for another, sending them new business and even moving existing accounts, when possible,” says BuzzTheory’s Henderson. “Alienating your partners by cutting those valued resources is not a smart way to kick off new partnerships with performing sales partners.”
AchieveUnite’s Caragol also advises a measured approach to integration. “You can’t go too fast because you’re likely to break things and you can’t go too slow because then you’re likely to lose partners,” Caragol says. “It’s a delicate balance that requires a careful and thoughtful integration process.”
2. Preserve Consistent Levels of Partner Support After M&A
Similarly, partner program leaders need to maintain partner support levels. That, more than anything, can provide a sense of stability for partners in what is otherwise a destabilizing situation. Partners are understandably concerned about past and future customers and revenue streams as a result of a merger or acquisition.
“From the outside looking in, [suppliers must ensure] that the program is well supported and that it will continue,” says Hyde Group’s Michelle Hyde. More importantly, she adds that partners must be assured that the merged organization protects all partner sales and revenue and demonstrates that partners are still valued.
Hyde adds that support for partners’ clients must also be maintained. “Assure that internal teams can support client implementations, billing, support, etc.,” Hyde says. “Having consistency and a good client experience through the evolution of the company is key.”
Maintaining consistent partner support levels involves keeping or recruiting channel experts to your newly merged program, according to AchieveUnite’s Caragol. “You have to have the right people inside the company and the right processes to make the acquisition successful,” says Caragol. “There are consulting companies that charge $20 million to [manage] these acquisitions, but if they don’t understand the intricacies of channels and partnering, they won’t be successful.”
Liongard’s Accardi also says consistency is key. “The more consistent you can be post-merger, the better for partners who can be averse to change,” she says. “If you do make changes, make sure to communicate the why and what’s good about the change for the user.”
Partner program changes and challenges are inevitable with M&A, but it’s how you approach it that makes all the difference, says Procure IT’s Jeter. “So, when M&A happens, those [suppliers] that address the challenges head-on and own the outcomes while getting better every day will come out ahead,” Jeter explains. “It’s the commitment to the partners that creates a win-win.”
3. Overcommunicate with Partners & Teams on Program Integration & Developments
This brings us to the next key point – communicate consistently. After the M&A event, partner program leaders should overcommunicate, especially with partners but also with their internal teams.
“[A] well-communicated plan with partners helps as they are wondering [what’s going to happen],” says Procure IT’s Jeter. “Be direct, be honest and come up with a plan that is highly probable.”
X4 Advisors’ Allen agrees that communication with partners is key. He adds that merging partner programs must share a cohesive go-to-market message for partners to operate under, not simply provide updates on the status of the organizational integration.
Leverage every opportunity and channel to communicate with your partners, including:
- Email blasts and announcements
- Newsletter mentions
- Notifications, banner ads and posts in the program partner portal or partner relationship management (PRM) platform
- Press releases and blog posts
- Social media posts
- Webinars dedicated to partners
- Meetings with key partners about the M&A event and how it impacts them directly
In addition to regular communications from program leaders, Procure IT’s Jeter recommends the CEO meet with partners after the M&A event. “Often, the partners never see a CEO from a provider, and it’s a big mistake,” says Jeter. “‘Be present and respect the partnership,’ is what I say to CEOs that ask [about] how to succeed selling through the channel.”
C-level executives should be part of established processes for partner onboarding introductions and regular quarterly and annual partner webinars and in-person events. A new company acquisition or merger shouldn’t be the first or only time partners hear from your C-Suite executives. Without an ongoing dialogue, they’ll see through the obvious attempt by company leadership to control partner perception of the M&A event.
Hyde Group’s Hyde reminds us that communication is not a one-way street. She advocates for not only “open and frequent communication from the supplier to the channel sales community,” but also for seeking channel input regularly and forming a partner steering committee to help ensure the new partner program is successful.
Liongard’s Accardi also recommends expanding communication beyond partners to the internal organization, so everyone is on the same page. “You also need to make sure you are communicating to your larger [organization, including] employees, leadership and partners [about] the ROI on participating in the partner program,” says Accardi. “Don’t assume the larger organization or partners understand your program. Keep educating and communicating.”
4. Assess the Combined Partner Programs Holistically to Shore Up Weaknesses Fast
A critical step when managing supplier partner programs after M&A is to evaluate the combined program’s strengths and weaknesses immediately. AchieveUnite’s Caragol believes this process should be conducted from various perspectives, including strategic, tactical, operational and from the partner viewpoint.
She adds that there’s a time limit on getting that work done. “On average, companies only have three to six months before they are likely to lose [partners following a merger]. Preserving, building and expanding trust among partners is critical,” says Caragol.
BuzzTheory’s Henderson agrees. “The M&A road is littered with integration horror stories that impacted partners’ customers and revenue,” says Henderson. It’s important that partner program leaders head off partners’ fear, uncertainty and doubt by presenting a clear go-forward plan along with timelines. Note: that doesn’t mean everything has to be ready to go on day one – that’s not at all realistic.”
Instead, Henderson says partners will want assurances right away that their customers will be treated well, that their revenue is protected, and that they’ll be able to offer and receive compensation for suppliers’ expanded service portfolios in the near future. “They want to see that you have a plan and that your plan includes them as an integral partner,” says Henders
5. Engage a Known Channel Leader with Clout Among Partners
One way merging partner programs can help establish trust among partners is to engage a respected channel executive to lead the program. Procure IT’s Jeter says post-M&A partner programs should retain or recruit a proven channel leader.
“The IT partner channel is built by entrepreneurs, and they see … the risk [to the partner] goes up with weak leadership and turnover,” says Jeter, noting a strong leader with a track record can inspire confidence in a successful partnership going forward.
Partners will be more understanding of any operational problems that occur during the integration if they believe in the reputation of the channel chief and trust that remediation will happen as fast as possible. The long-standing and trusted relationships between the channel chief and key partners can go a long way in buying time for the program to sort through newly integrated channel processes.
6. Align Partner Program Goals with Overall M&A Goals
Ultimately, the partner program goals must align with the overall company goals following M&A. Liongard’s Accardi advises companies to develop a clear understanding of the partner program success metrics and ensure they align with the merger and acquisition goals.
“Pre- and post-M&A, it is critical you understand and have KPIs around the success of the program,” Accardi says. “If a program isn’t serving the growth goals of the new entity, now is an opportunity to explore with your new partner base what they value that can help to drive growth and relaunch. Don’t be afraid to make changes if they’re needed.”
Procure IT’s Jeter says that executive buy-in is critical for the survival of the post-M&A channel program. “The key here is the buy-in of the program at the provider or supplier level,” Jeter says, noting that if the combined company’s focus is on the customer, the partner model will win long-term because today’s buyers need more objective guidance throughout the IT procurement process.
7. Tailor the Partner Program to Include New Acquired Partner Types
Disparate partner models and types from both companies’ programs must integrate after the M&A event to preserve revenue-producing engagements with existing partners.
“You can’t manage ‘two guys and a truck’ the same way you manage CDW or SHI,” says X4 Advisors’ Allen. “You must recognize the emergence of new models like the ‘super-agent,’ [which includes] Bluewave, Simplify, ARG and VCom, and manage them both centrally and aligned with sellers in their markets. Recognize the evolution of the hybrid TSD, [such as] Bridgepointe and UPSTACK, and avoid managing them into the traditional TSD model by ignoring their connectivity to customer decision-makers.”
The emergence of partner ecosystems that include non-transacting influencer and retention partners may also be a consideration for some deals. “Increasingly, companies are leveraging partners at the point of value, not only the point of sale,” says BuzzTheory’s Henderson. “Influencer and retention channels can be critical partners in ensuring customer pipeline and retention through M&A and should be brought into discussions early to help smooth the way.”
Nearly every successful partner program will be touched by M&A. Managing the impact is vital to maintaining – and growing – partner revenue to attain the ROI that investors project. To ensure success, consider these best practices when navigating channel management after a successful M&A event.