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| Are Acquisitions and Mergers Good For Us? | ||
| Every
time a major acquisition or merger takes place
in the LIMS industry and a new entity is created,
my customers and potential customers seem to
come out of the woodwork to ask me what I think.
In fact, this question belongs on my FAQ (Frequently
Asked Questions) list. My response usually boils down to, “Gee whiz! I don’t know!” But let me expand on that. What People Want to Know Some people ask me this question out of a true sense of curiosity. Most, however, want to know how a particular transaction will affect them and their projects. How the Market is Affected When one company acquires or merges with another, the initial conclusion might be that the combined—and bigger—company will now have a larger market share. In reality, while this might be true at the specific moment when the actual transaction takes place, it does not necessarily mean that the merged company will retain that market share as time goes on. There is always some attrition, both of customers and employees, and that’s true whether a company acquires or merges with another company, or not. Also, if the merger or acquisition causes widespread concern—some might say panic—in its newly enlarged customer base, those customers are much more likely to flee to another source of the solutions that meet their needs when the next project comes up. The upgrade path is another factor to successfully merge two—or more—customer bases. Keep in mind, however, that regardless of the upgrade path, when customers eventually need another, unrelated LIMS, and the net effect of staying with the newly merged company is about the same as buying any other vendor’s product, they’re probably going to look at other vendors’ products unless the newly created bigger company makes them a particularly attractive offer. And this offer can’t be limited to only money-related issues. Based on my own experience, customers seldom buy the LIMS that is the cheapest. Discounts may be a factor, but they are not usually the major reason for making or changing a choice of LIMS. So, for those people who fear that the newly merged company will be so big and powerful that it will crowd-out all other choices…well…I suppose it’s possible, but it hasn’t happened, yet. My own belief is that there’s still room to compete in this industry, and we still see that there are many, many LIMS companies out there as choices. And then there’s the fact that the newly formed company could turn into an unbeatable powerhouse, an out-of-control mishmash of products, or something in-between, and we have no crystal balls available to help us see the outcome. What if Your Product is Affected? If this new company owns your product, you’ll have to wait and see what happens. The new company will have several issues to address, including:
What if My Product is Discontinued? However, let’s assume that your software product is one that is discontinued. Let’s also suppose that you’ve not yet upgraded to the latest version. Is it worthwhile to upgrade to the latest version of a product that will cease to exist in a few years? Whether you ever really liked the product you’re using, the fact remains that few LIMS are kept forever. The lifespan of a LIMS implementation appears to be shorter than it was five to ten years ago. Many companies don’t need a LIMS product that will be around for another ten years, and no product currently on the market carries a longevity guarantee, either, for that matter. Plus, remember that the upgrades and the support for your product won’t go away overnight. In fact, you don’t need to rush to switch to any other product. On the contrary, this is a good time to watch what’s going on at the company and determine what will benefit your own implementation most: sticking with the merged company or switching elsewhere. And, you don’t have to do anything immediately. You have the luxury of making a careful determination and considered decision, unless you were about to begin a new project Of course, supporting a product for a number of years is one thing; supporting it effectively is another. If you’re at the point where you can see the “handwriting on the wall” and realize that support for your discontinued product has become such a low priority that it’s worthless to you, then it’s a good time to reevaluate your options. There’s also the fact that some software vendors have actually created upgrades to their software to upgrade from their competitor’s software. So, if your particular product is to be dropped, the only upgrade path available may actually be migration to a competitor’s product, as strange as this might seem. What Should You Do? If your product belongs to the newly merged or combined company, you should make sure you understand their recommendations, upgrade paths, deals, or other suggestions they’ll make to the new customer base. If you own a competitor’s product, don’t assume that this new company will push your current vendor out of business, just because the new company appears to have such increased market share, at least at first glance. My advice boils down to this: Sit tight and watch closely. |
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