In major UCaaS news, Zendesk, a contact center provider, announced that they entered into an agreement to be acquired by an investor group headed by the private equity firms Permira and Hellman & Friedman. It is the latest in a trend of UCaaS companies being acquired by private firms. From Citrix Systems to Vonage and beyond, organizations are increasingly going the private equity route.
There are many reasons why companies choose to be acquired: it is lucrative, eliminates the headache of boards, and allows leaders to focus on long-term growth as opposed to immediate ROI. However, this string of acquisitions significantly impacts customers and the UCaaS landscape. It enables a few private firms to hold the majority of the market, decreasing competition and making it difficult for innovative companies with unique benefits to get started
Here is what you need to know about the worrying trend of private equity acquisitions and their impact on customers and the industry:
The Acceleration of Acquisitions: What's Happening and Why
For a while, the UC landscape has enabled various companies to reach customers and create unique, innovative solutions that benefit them. However, the past few years have seen private equities snatching up these businesses and absorbing them.
Although Zendesk is the latest, several other big names in the UC space have been acquired recently. Vista Equity Partners and Evergreen Coast Capital Corporation acquired Citrix Systems in a significant deal earlier this year. The same equity firm also acquired LogMeIn, a cloud provider. Another investor group, Searchlight Capital Partners, acquired Mitel in 2018. Each one of these acquisitions came as a surprise to experts in the space. Even those with a significant presence and robust offerings in the UC space are increasingly turning to private equity firms to buy out their businesses.
For many companies, acquisitions make sense at face value. No longer having to report to shareholders is attractive because it means businesses don’t have to sacrifice long-term success for short-term growth. Leaders point to the ability to stay agile and the opportunity to focus on the long-term sustainability of the business as the reasons they choose to agree to an acquisition.
In fact, a lot of the companies that are acquired continue providing services with few caveats.
How Acquisitions Impact the UCaaS Landscape
To see how the rise in acquisitions could impact the UC industry, one only has to look at the tech giants and how they rose to their places of power. Corporations like Facebook, Amazon, and Google didn’t have to outperform their competition. They simply acquired other companies and knocked out any potential rivals. However, this results in a weakened market, creating a lack of innovation and customer options.
The main issue with the significant trend in acquisitions is that the users on these platforms aren’t sure what comes next. Each acquisition might completely change the future of that company as more firms are choosing to acquire a UCaaS system to make it an add-on feature for their own companies.
For example, Ericsson recently acquired Vonage and is changing the company to become an add-on for their own service. Vonage’s loyal customer base might find that the UCaaS system they spent so much time and money investing in is no longer running, forcing them to change to services that might higher priced. Customers for the newly acquired Zendesk also face this uncertainty and may be required to find a new contact center provider.
While the acquisitions are a convenient choice for the company leaders and shareholders, it could become terrible news for customers that rely on competition to get an affordable price and innovative service.
Company Acquisitions Hurt Customers in the End
No one acquisition signals a reason to worry. However, the trend of UCC businesses slowly being acquired by larger firms with a vested interest in killing competition hurts the industry as a whole. Keeping the industry in the hands of very few wealthy corporations signals serious issues.
Customers have fewer options, possibly resulting in increased prices and less flexibility. Instead of finding a company that meets their unique needs, companies of all types and sizes will soon only have a few from which to choose.
Has this acquisition trend already affected your business? Contact us to learn more about how we can help.
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