The communications and financial industries, especially UCaaS (unified communications as a service), FinTech (financial technology) and VoIP (voice over Internet) evolve so quickly that it requires highly effective marketing and manpower as well as investment just to halfway compete. Entrepreneurs who begin by bootstrapping a new product, service or idea cannot keep going unless they can attract a powerhouse to invest in them, acquire them or merge with them. The big guys have enough clout, connections, presence and money to fine tune the new but highly practical and attractive product, service or idea. Some entrepreneurs and small companies operate with this as part of their business plan: mergers and acquisitions. Those in the UCaaS, FinTech and VoIP industry are prime to attract such a windfall.
Recent examples of these type of acquisitions in communications and financial industries include:
nexVortex acquisition of Northwest Vox
Due to multiple acquisitions, Vonage now is second in hosted IP telephony revenue.
Cisco acquisition of BroadSoft
Magna5 Acquires NetServe365Fourth
There are many types of mergers and acquisitions.
Congeneric mergers: Two businesses serve the same market and customer-base but in unique ways. An example is a wholesale DID marketplace and hosted PBX who both provide these different services for entities that offer or use a lot of IP communications services and products.
Conglomeration: Two businesses have practically zero intersections of business products or services. For example, one business may purchase another business for no other reason than for the tax break. On the other hand, a new business can be formed. Then they merge, again, resulting in a tax break.
Horizontal merger: Two businesses are absolute competitors. They provide the same products, services and markets. They merge in order to tap into the best of each.
Market-extension merger: Two businesses that sell the same products or services in uniques markets. An example of two businesses that sell the same but to different markets may include Technology Marketing Company who serve mostly the Americas and ConnecTechAsia who serve mostly Asia.
Product-extension merger: Two businesses that sell unique products that have something to do with each other for the same market. An example might be VoIP Supply who provide communications equipment and Nextiva who provide hosted PBX solutions.
Vertical merger: A vendor of a business and the business OR a customer of a business and the business. An example is an MVNO and DIDX or a VoIP company or international contact center and DIDX.
Some mergers and most acquisitions involve one business buying another business with cash, stock or both, or one business all the other company’s assets. The company whose assets are bought may then go out of business or start a new set of service and/or product provision. There is also the reverse merger (similar in style to a reverse mortgage). A private business has a chance to quickly go public. The private business buys a publicly-listed inactive business. This inactive business is literally not conducting business, and it has no limited assets. By doing this, the private business can become a new publicly listed business with shares that it can trade.
This is by no means a completely comprehensive list of types of mergers and acquisitions. Our goal in sharing this article is to inspire our DIDX customers, vendors and industry friends to understand mergers and acquisitions and perhaps include M & A in its business plan as a method of success.
One of the best ways to meet M&A-bound entities is at US and international conferences and exhibitions. These events offer meeting tables, booth meetups, receptions and many other extracurricular business opportunities. Channel Online keeps a list of communications events available including TelcoDays Las Vegas scheduled Jan. 7 – 8, 2018 and ITEXPO Fort Lauderdale Feb. 14 – 16, 2018 and FinTech Weekly keeps a list of fintech events where those interested in mergers and acquisitions in these industries can meet in person and finalize the deal! For the first time, ITEXPO offers a new collocated event The BlockChain Event. Reach to us at DIDX by contacting sales @ didx.net to meet you at industry events to discuss your wholesale direct inward dialing phone number needs and exciting trends of now and future.