Navigating Mergers and Acquisitions in HR Tech

By: | November 20, 2018 • 3 min read
Steve Boese is HRE's Inside HR Tech columnist and chair of HRE’s HR Technology Conference®, which is taking place Sept. 28-Oct. 1, 2021, in Las Vegas. He also writes a blog and hosts the HR Happy Hour Show, a radio program and podcast. He can be emailed at hreletters@lrp.com.

Recently, several significant mergers and acquisitions in the HR-technology market have made news. From Ultimate Software acquiring PeopleDoc to Saba Software acquiring Lumesse (and Halogen Software before that) to the latest and largest announcement that SAP will acquire Qualtrics for $8 billion in cash, there has been no shortage of wow-inducing developments in HR tech.

But while these announcements certainly produce headlines and get analyzed for their impact on share prices, market share and the software company’s long-term futures, we often tend to overlook one really important constituency that is impacted by these M&A events: the customers of the company that gets acquired.

While the M&A announcements and subsequent comments from executives of the acquiring company usually talk a little about what the future may hold for the acquired product and its customers, there definitely can be some uncertainty about the future direction of an acquired company and product set. For customers of those products, it is important to understand what an M&A event may mean for them, and to be as prepared as possible for any impacts—including changes that can significantly alter the customer’s HR technology platforms and future direction.

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If your company is a customer/user of an HR-technology solution that has been acquired by another HR-tech provider, here are three things to consider as you react to the news.

  1. What is the vendor’s (true) commitment to continue to develop and support the “acquired” products?

Just after an M&A event, it is common for the acquiring company to issue a statement declaring that it is committed to the products and customers it has acquired, and in the very short term that the customers will not notice any substantial changes in development and support. But looking to the future, customers need to understand the provider’s intended approach to the acquired products. Some important questions you will want to ask of the provider, and carefully monitor its responses, include:

  • How will the published product roadmap change?
  • Will the underlying technologies change and how?
  • Will the process for updates, bug fixes, training and how overall customer support change?
  • Will the acquiring company continue to invest its internal R&D resources at current or increased levels moving forward?

The main things you are trying to learn on the product side is the expected time period where the current solutions will remain viable and suitable for your organization’s needs, and whether the acquiring provider sees a defined end date for these solutions. This information will help determine your future plans.

  1. How will working with the provider change after the M&A activity is completed?

As time passes, the acquiring company is likely to begin making changes to processes, policies and interactions with customers of the acquired company. Some of these changes may seem small at first, but over time they do require existing customers to get acclimated to new ways of working. Remember that a large part of the success of provider/customer partnerships is tied up in “non-product” areas like company-culture alignment, personal relationships with key staff and the community of other partners and users and the overall product ecosystem. Even things that seem less important, like the continuing of the acquired company’s annual customer and user conference (if it holds one), can be important indicators of how customers are going to be affected. After an M&A event, customers of the acquired company should carefully monitor all the customer touchpoints and provider interactions to quickly detect any adverse impact to the provider partnership. Any declines could be a signal of even worse—or shall we say, less than optimal longer-term outcomes.

  1. What other options do you have if things don’t turn out how you expected?

In the current HR-tech environment, where increased M&A activity seems likely, it is a good idea to take an inventory of the current set of HR-technology solutions in place at your organization and assess the likelihood that a given solution represents a takeover or acquisition risk.

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