Partnerships matter in the M&A world
By Allie Glans - NextPath Associate, MBA candidate University of Washington Foster School of Business
Look around: Do you already know your acquirer? Are you thinking about your competitors and partnerships from a strategic perspective? Many acquirers have pre-existing relationships with their target companies prior to making a tender offer - whether that be a strategic partnership, a previous employment contract, or maybe they are simply competitors. We at NextPath can confirm through experience that the majority of successful acquisitions occur between companies with pre-existing relationships. In fact, more than half of the 29 software companies sold in 2021 had existing relationships with their acquirers.
Here a few interesting examples:
Arria NLG and Boost Sport AI Built a Strategic Alliance
Arria Natural Language Generation (Arria NLG) acquired Boost Sport AI in November 2021 after a successful 6-month partnership. Boost Sport AI uses data analytics and predictive technology to power sport performance and digital storytelling content. Boost helps brands customize sports content in digital media channels, which was a vertical that Arria had targeted for expansion. Instead of an outright acquisition offer, Arria and Boost formed a partnership in May 2021.
Boost demonstrated its value through a successful partnership, and Arria was able to test out Boost’s technologies at a much lower stake before making an acquisition offer. This validated the business case and lowered the risk to Arria, which will improve exit multiples. The key is to impress your partners!
Amazon and Selz: Amazon Acquires a Competitor
Amazon acquired e-commerce company Selz in January 2021 to bolster its attack on Shopify and to continue discouraging competition in the e-commerce space. Selz specialized in offering features to scale and manage businesses in the digital product space, including things like ebooks, live class sessions, nutrition plans, recipes, and more. Amazon shut down Amazon Webstore in 2015 which offered a similar service to Shopify and allowed small businesses to run their online stores on Amazon. Since then, Amazon’s third-party marketplace is thriving and Selz provides Amazon the tools it needs to help customers customize their online stores.
Selz wrote an interesting article a few years ago to urge self-publishing customers to keep their distance from Amazon’s self-publishing services. The reasons being - Selz offers more control over the ebook and marketing/sales channels than Amazon does with all of its distractions - Selz keeps users in the business’s ‘world’ without getting lost in all of Amazon’s other shiny website offerings.
Keep close track of your competitors, as you never know who could come knocking on your door.
Saykara and Nuance: Founder’s Prior Employer Acquirers Saykara
Nuance Communications acquired Saykara in February 2021 to expand Nuance’s ‘’...market and technical leadership in conversational AI and ambient clinical intelligence (ACI) solutions…’’ according to Nuance’s recent press release. Nuance’s decision to purchase Saykara was one out of a strategic product fit, but we wanted to dig a bit deeper to see if the two companies had an entangled history before the announcement - and the answer is - Yes, they did! Saykara’s founder and CEO, Narjinder Sandhu, served as Nuance’s Vice President and Chief Technologist in Healthcare Research and Development, prior to going off on his own and founding two companies (Twistle, Inc. & Saykara) - all within 10 years. Najinder already had a relationship with Nuance even before he started Saykara - This demonstrates that past employers can make great partners in your exit, too.
Your Partners are Important
Most of the time, acquirers have a business partnership or pre-existing history with their targets prior to making the offer. This allows both sides to assess the strategic market and product fit, and is the easiest way to test our how well personalities match. As a CEO, you should be thinking long-term about who you partner with and even consider your competitors as friends rather than foes.
Developing the right partners takes time, focus, and sometimes trial and error - but it often pays off with growth and expanded M&A exit options. NextPath can help you review your strategic partnership plan as part of our free M&A Readiness Assessment