Question: A common question SageCircle has been receiving concerns the likelihood that there will be acquisitions of analyst firms during the current recession.
During a recession, companies with strong balance sheets often acquire companies with weaker financials because the purchase price has been cut. Both Gartner (cash at September 30th was $145.2 million) and Forrester (NASDAQ: FORR, cash and marketable securities at September 30th were $254 million) have a history of acquisitions. They also have dedicated M&A teams and CEOs that assure Wall Street during quarterly earnings calls that acquisitions remain a potential tactic “at the right price.” As a consequence, there is always the possibility that one or more small or mid-sized firms will be acquired by one of the two major public firms.
Who could be acquired? Almost any firm. Obviously mid-sized firms like AMR Research that have gone through recent job actions could be thought to be shoring up their finances to ride out the recession… or make themselves a more attractive acquisition target by reducing cost structure or eliminating duplicate reearch coverage.
Who could be buyers? While Forrester and Gartner have the requisite strong balance sheets and motivations, they are not the only potential buyers of analyst firms. Companies that have made analyst firm acquisitions over the last few years include Datamonitor, Informa, Mastercard and TechWeb. Mastercard? Yes, there might be totally unexpected players out there that take everybody by surprise such as when MasterCard acquired Tower Group from Reuters Enterprise in May 2004.
Even IDC could be an acquisition candidate under the right circumstance. IDG to a certain extent is similar to its earlier rival Ziff-Davis. Privately held Ziff-Davis (periodicals, book publishing, on-line tech news sites, events, consulting, and analyst divisions) was broken up in 1994 after family patriarch and controlling owner Bill Ziff decided to sell the company. Privately held International Data Group (periodicals, book publishing, on-line tech news sites, events, consulting, and analyst divisions) could be broken up if controlling owner billionaire Pat McGovern decides to sell the company. McGovern is in his early 70’s so it is not inconceivable that he could be thinking ahead toward retirement.
- Clients of analyst firms, both end users or vendors, need to track the financial and ownership stability of their primary analyst firms, especially during contract renewal times
- Analyst relations programs need to put contingency plans in place in case the employer of one their key influencial analysts is involved in an merger & acquisition event
Bottom Line: The current recession makes it more likely, not less so, for an acquisition to occur in the analyst ecosystem. Clients and AR can prepare themselves for such an event by keeping a finger on the pulse of relevant analyst firms and putting into place plans to handle any disruption that comes with any M&A event.
Question: AR professionals – Do you have plans and processes in place to handle when the employer of a key analyst is acquired? Clients – Do you insert terms and conditions into contracts of firms you suspect are a potential acquisition target?