The State of M&A: What Does Vendor Consolidation Mean for Partners?

Partners face compensation reduction, contract revisions and personnel turnover as vendor consolidation sweeps across the channel.

Inorganic growth is a natural part of life for people in the channel. Many partners experienced consolidation during their careers at suppliers, and today they express little surprise at seeing their vendor partners merge.

JS Group’s Janet Schijns

JS Group CEO Janet Schijns said M&A will continue among vendors, albeit functioning more as a buyer’s market than as a seller’s market. She said channel history serves as a guide for how consolidation may occur, specifically within the tech services distributor (TSD) channel. Specifically, history tells us that the number of vendors will ultimately grow smaller, not larger.

“If you look at some of the TSDs, they might have 55 vendors in a specific area,” Schijns told Channel Futures. “That’s not going to hold. We saw that in the IT industry. The IT industry collapsed categories years ago, folding into one big vendor or two big vendors.”

Different Technologies

Vendor consolidation has disrupted UCaaS in a big way, with massive increases in sales incentives in the months leading up to acquisition and subsequent decreases in compensation following M&A. Moreover, channel insiders say that pattern of disruption may come to CCaaS and cybersecurity soon. However, they note that those two industries may see a different rhyme and reason, as well as financial implications, to their deals.

Partners will need to weigh compensation changes as well as many other topics as they try to serve end users whose platforms might be undergoing consolidation. Channel Futures spoke to Schijns and three other channel veterans about how partners can wisely guide customers and their own teams through vendor M&A. They spoke predominantly about how technology advisors (agents) are seeing an impact, but offered advice that MSPs and VARs can also find helpful.

Channel Futures will continue this three-part series with articles about respective consolidation occurring among distributors and customer-facing partners.

Scroll through the 10 images above to see insights about what is happening in supplier M&A and what partners should do about it.