2021 was a big year for consolidations in the relatively new and growing market of employee communications applications (ECA). The trend is likely to continue through 2022. Why? Because, with billions of employees living through very unusual times, tech developers have caught on to a critical need for modern workplace communications solutions. There are also dozens of vendors out there trying to tackle the employee experience dilemma (and opportunity), making the market ripe for consolidation.
How Communications Pros Can Read the M&A Tea Leaves
With many tech providers claiming to address all things relating to employees, how are the communications professionals, who are expected to implement and put these technologies to work, supposed to understand how a particular solution is intended to solve real business problems and best help them in their work? For the companies footing the bill, what can they expect from their investment? Will it improve employee productivity and morale, and how can it possibly address and even reduce the great resignation taking place globally?
The answers can be found in understanding the nature of the M&A activity that took place last year and what we might expect this year. In general, there are two underlying rationales for why a company merges with or acquires another company. The first is because the technologies of each company are synergistic and a combination furthers the companies’ goals of solving a particular business or market problem. For the company customer, they now have the opportunity to grow with their current vendor and purchase the new capabilities. The second reason, in many cases, is more venture capital/private equity investor driven, where a vendor acquires another just to pool customers and revenue to increase their market share. Unfortunately in the latter scenario, this often results in the sunsetting of the acquired company's tech, not necessarily a good thing for the customer using that solution.
The transactions that took place in 2021 can be seen falling into these two buckets through the press releases announcing them. To start things off, we had Staffbase, a leader in mobile employee apps and intranets, acquiring Bananatag to now offer companies an email solution. Then there was digital signage provider Four Winds Interactive acquiring email solution provider Poppulo; and former employee advocacy company SocialChorus “merging” with its foremost rival, Dynamic Signal, to rebrand as Firstup.
Several additional transactions occurred in 2021: intranet provider COYO acquired employee advocacy company Smarp; workplace platform Appspace acquired employee engagement company Beezy; Tivian, an employee experience data company, acquired HR communications company GuideSpark. And coming full circle to end the year, Staffbase once again entered the picture when it acquired Valo Solutions, a provider of intranets and workplace solutions for Microsoft 365, SharePoint and Microsoft Teams.
Given this activity and considering the two M&A categories each falls into, how are communications professionals supposed to make sense of all that is going on in the ECA market? More importantly, what should companies be looking for when making technology buying decisions recognizing the importance of these tools to addressing issues of employee engagement and retention?
Related Article: Another Merger in the Employee Communications Applications Market?
5 Questions to Ask Before Investing in an ECA
With some technology vendors claiming to solve the entire employee experience problem, some being guided by their venture capital/private equity investors (likely more interested in the return on their investment than improving the communications industry) and others truly focused on helping the internal communications industry and its professionals, these five questions should be asked and answered before making such an important investment decision:
- Who (which professional in my organization) is the M&A transaction intended to help — and how?
- Current customers of a company being acquired should ask: What’s going to happen to the technology solution I’ve already purchased and am now using? Will we be required to transition to a new solution?
- What is the overall vision for the company and how does the transaction further it?
- What is the product roadmap for the next six months? Once answered, does it further the vision they’ve hopefully been able to articulate?
- How much am I now going to have to pay? More?
As the labor market continues to tighten and technology vendors vie for market position, leadership, and to take advantage of the growing employee experience opportunity, it is critical that the technology company you work with (currently or in the future) is aligned with your internal communication goals and needs. As we look to 2022 and as the ECA market continues to evolve, the companies comprising this technology market will likely look for ways to grow and remain competitive. And, in doing so, M&A activities will likely continue to be part of their growth strategy.
While employees are the ultimate beneficiaries of employee communications applications, employee communications professionals are the ones charged with putting such solutions to use. When vetting ECA vendors, especially as the consolidation trend continues, understand that notwithstanding what you might read in a press release, this might not be the actual intent behind the transaction. Nevertheless, by knowing and asking the right questions, it will become evident whether the vendor you eventually choose to work with will help you to be as effective and efficient in all aspects of the important work that communications professionals do.