Deeper Thoughts
When A Tech Vendor Gets Acquired, It’s Not Always a Good Thing for You

In the natural push and pull of market cycles, what goes up must go down…eventually. And just as the ranks of the mortgage industry swelled to enormous proportions in order to adequately service an enormous re-fi order volume, so too are they now shrinking as rates rise and volume abates. (I’ve already shared my feelings more than once on alternatives to the ramp up/layoff cycle, and you can see them here.) And yes, that’s, at least in part, a euphemistic way of saying “mass layoffs.” But it’s also a way of noting that, during cycles like these, entire companies tend to disappear. Some simply go out of business. Others are acquired or become part of mergers. 

Bigger Rarely Translates to Better Service

Needless to say, all of these conditions aren’t typically conducive to great customer service. When a professional fears for the continued existence of her employment, or is uncertain as to what the “new boss” will be like, it’s understandably challenging for that employee to keep going above and beyond. And that’s to say nothing about the typical transition (read: chaos) that comes with merging operations systems, protocols, reporting chains, communications systems and a thousand other little things that make a company work every day.

Now, in the long run, many of these acquisitions, joint ventures, mergers and the like tend to work out. Most of the time, the company that is acquired ends up looking a whole lot like what the acquiring firm looked like before the transaction—and that includes the customer service models. 

We’re all working harder. 

Of course, not many clients are sympathetic to the bumps and hiccups that tend to accompany the acquisition of the vendor they’d previously chosen. Especially when, as mentioned before, we’re all working twice as hard to succeed in a much more competitive environment. We’re working harder to keep existing clients and especially to win new clients. We’re trying to read the tea leaves to predict what’s next in one of the most unique market environments we’ve seen in quite some time. We’re all a little more anxious and a little less patient. 

Challenge as an opportunity to grow.

And so it is that, in challenging times or periods of consolidation, the big may get bigger via acquisition and merger. But we also see a lot of mid-sized companies climb to the top as well. Think back to the meltdown in 2007. Who were the “blue-bloods” of the lending industry before that? Who were the most reputable and successful technology providers or title insurance underwriters? Were they all still in that position as of, say, 2010? The same can be said of the default/REO era in the early 2010s. The folks who had the biggest booths at the annual national conventions before then didn’t always have the same presence when refi returned later in the decade. Instead, there were always smaller or mid-sized firms that grew to take their places.

And the winners will be…

Those growing firms are the ones that will come out of the coming few years in a better place. Firms with strategically chosen and implemented technology (and not just the shiny new tech—but rather, well-planned tech stacks that eliminate production silos and grow with the company and future innovations). Firms who planned sustainable growth, rather than companies that simply made hay while the sun was shining. Firms who adapted to the changing market. 

Firms who continued to provide stellar client service, even when their own conditions became more challenging.

Keep that in mind in the coming months and years. M&A can be a great growth strategy (or a great way to cash out). But when it’s your vendor that has been acquired, it’s not always a great development for you.