Change of Control and Opportunities for Cost Savings

It's important to keep track of "M&A" among your suppliers for a number of reasons: compliance, contractual implications (known as assignment clauses), conflicts of interest, and other boring contract housekeeping stuff. 

But change in control can offer an opportunity for significant cost savings too. 

Mergers, acquisitions, divestitures, and spin-offs are very common in the B2B information services and market data space. Common are the following types of deals: 

• Two large providers combine, such as the IHS - Markit deal in 2016
• A large vendor buys a smaller, niche publication, such as the Acuris purchase of SparkSpread in 2018
• A division is sold or divested from one owner to another, such as Thomson Corp.'s sale of its Finance & Risk division to Blackstone, also in 2018
• A PE or VC firm makes a big investment in one of your vendors, or your vendor closes another round of funding, such as the huge Series A Alpha-Sense closed in 2016

Sometimes you'll get two or more of these at once, as when DrillingInfo bought competitors 1Derrick and PLS, and then was promptly sold by Insight to Genstar just days later.

When a deal goes down, in all likelihood a rep from the new owner will be reaching out to discuss your contracts. Take the opportunity to review the new owner's service offerings for cost savings and ROI gains: 

• How does your existing TargetCo subscription tie into, or overlap, with the BuyerCo product offerings? A small, niche acquisition is usually integrated with a similar product - are you paying twice for the same content? The vendor may squawk - no, there's no overlap! Make the case there is, and the cost you pay should be reduced to reflect this.
• If you have subscriptions with both the TargetCo and BuyerCo, think about what kind of economies of scale you can realize with the combined spend. If you spend $500K with TargetCo and $500K with BuyerCo, should you really be paying $1,000,000 when they merge? Argue that purchasing power should apply across your entire spend with a vendor, not just for single specific product (something you should be arguing with all your vendors anyway)
• Take advantage of the disarray at the new owner (trust me: these deals are absolute chaos for months after close): can you get your contract repapered with better terms? Can you bolt on other BuyerCo offerings you've been eyeing but were over budget? This may be the time strike a great deal. 

Depending on the complexity of the acquisition, you may be looking at a change in license structure, changes that may not benefit you. If you know the BuyerCo favors licenses unfavorable to you, try extending your contract with the TargetCo before the deal closes, effectively grandfathering you in for a couple years before a new less attractive license structure is forced on you. 

I recommend creating alerts in Factiva, MergerMarket or Nexis to track your portfolio of vendors for significant M&A, Funding or C-Level changes. There may be cost savings and ROI opportunities if you play your cards right. 

- Kevan Huston