Private equity acquisitions in the Microsoft channel: What they mean for customers

Microsoft’s partner channel is one of the largest among all technology companies, with thousands of participating organizations including many specialized in Azure, Dynamics, Office, and beyond. A Microsoft-funded study estimated that partners would generate $984 billion in revenue related to Microsoft technology in 2020, with a forecast of $1.2 trillion by 2024.

Hardly a day goes by without news of a merger or acquisition involving a Microsoft channel partner or ISV. These transactions take various forms, with different motivations and circumstances. Private equity (PE) firms have long been a participant in the channel M&A space, but their impact is often hard to understand outside the boardroom. What should customers or employees expect after a deal closes? How have these acquisitions changed over time?

Business transition

Consider the case of Microsoft-focused firm The NAV/D365 People, a UK-based partner founded in 2009 that faced a turning point when the founder wanted to retire in 2018.

“PE came in to make that possible,” explained company CEO Paul White. In 2021, they were acquired by a trade buyer, backed by the PE firm Providence Equity.

• See also: A Microsoft partner CEO shares his acquisition experience in the channel

And what changed for TNP as a result of the outside investments? According to White, three of the four founders remain engaged in day-to-day operations. Working with investors while continuing with the business was not without its challenges, but White says the company was supported by advisors from the PE investor.

[Success or failure is] not about the money, equity or contract terms (though it is of course).  It’s about the people.  Is there chemistry, added value, and respect? I think that most people (staff and customers) have moved beyond historical perceptions of PE investors.  They understand that they are motivated by growth – which is good for all stakeholders. 

The private equity vantage point

How do PE firms approach investments and acquisitions? In an ideal situation, savvy PE firms will ensure that the transition changes very little about business as usual, says Linda Rose, an author, speaker, and entrepreneur who has sold multiple technology businesses, including a Microsoft partner business. She now works as an advisor to companies involved in M&A efforts and says identifying the right buyer requires care and the right expectations.

Even when using an M&A advisor, the process can take up to 9 months to find a good buyer with the right fit culturally as well as financially. Hopefully the seller has chosen a company that aligns well with the current products and services. But ideally, the largest 10 clients should be contacted by phone immediately to share the news and begin a dialogue on what might change as part of the transaction.  This is a perfect time to share what new products and services may be available as part of the transaction.  

In most cases, an acquisition should help a partner improve the business, says Rose. They may be able to add more consultants, develop more products, and offer more services, together with an expanded support base. But it could also lead to less favorable changes, she said.