Mergers are often difficult to make sense of. Of course, the company owners or investors want to cash out at some point, but rarely are companies mergers of equals. While press releases and newspaper articles might mention “growth” or a “strategic acquisition,” oftentimes, it’s anything but. The acquiring company does all but dissolve the company it acquires — dissolving a brand name and offboarding customers using the target company’s product and migrating them to that of the acquiring company.
With the recent news about the acquisition of Firmex by Datasite, uncertainty abounds, especially for customers. Datasite is a provider of SaaS-based tools used by financial advisory and legal firms to support deal preparation, asset marketing, and buy-side acquisition, and Firmex is a provider of virtual data rooms (VDRs) and file-sharing services. M&A transactions are essentially carried out via document sharing at scale, often involving thousands of documents to be reviewed by dozens of professionals both inside and outside the firms involved.
While this merger seems reasonable, since the services of both companies are evaluated and purchased by similar audiences of M&A and legal professionals, digging deeper into the messaging of the press release reveals some potential issues for current customers of Firmex.
As such, these customers might be needing another VDR solution down the road, or perhaps sooner than they think.
Lower Middle-Market or Top 20?
Datasite proudly proclaims that its customers are located in more than 170 countries and that “74 of the top 100 legal firms and all the top 20 global financial advisory firms” use its technology services.
While impressive, Datasite’s description of Firmex isn’t presented in quite the same way in the announcement:
Firmex, which provides customers with secure document sharing solutions across many different use cases in the lower middle-market, including M&A transactions, loan syndication, fundraising and licensing deals, will run as a strategic business unit within Datasite and will function as a standalone entity.
“Lower middle-market” seems like quite a different group to sell to than the top 20 global financial advisory firms.
This is, of course, acceptable; many companies develop brands, products, and service lines at different price points for different markets. However, it seems highly unlikely that Datasite will continue to want to sell to and support Firmex’s customers. As such, Firmex’s customers will need to find a solution provider that better understands their needs.
Already in the Data-Hosting Business
Furthermore, Datasite is already in the data-hosting business. According to the press release, earlier this year, Datasite launched data-hosting capabilities in Australia, in addition to opening offices in Stockholm and Los Angeles.
As a technology company familiar with cloud-based, document-hosting infrastructure, it is not clear at this point whether Datasite will lean on the infrastructure already developed by Firmex, or simply use its own. Changing up of data centers could be disruptive for current customers.
Additionally, given its computing resources and technical know-how, Datasite could launch its own competing VDR product, appealing to the up-market it claims in its press release.
What Will Customers Do?
According to the press release, Firmex “will run as a strategic business unit within Datasite and will function as a standalone entity.” This can mean several things: business as usual or Firmex will be closed off from the resources and innovations of the parent company Datasite (or both).
As such, the experience of Firmex’s customers might be disrupted. Current clients should contact their customer success manager to determine what changes, if any, might be looming.
Mergers can be complicated for multiple stakeholders, including the customers of the company getting acquired.
The Datasite acquisition of Firmex seems logical on certain levels, but critical differences in customer audiences, Datasite’s current investments in hosting infrastructure, and Firmex’s eventual position within Datasite post-acquisition could be troubling for Firmex customers who simply seek reliable, secure, and private document sharing services. Customers might soon consider another solution provider for their virtual data room for their secure file sharing needs.
Jake Wengroff writes about technology and financial services. A former technology reporter for CBS Radio, Jake covers such topics as security, mobility, e-commerce, and IoT.