Marketing Run Amok or Genius in Hiding?
If you play in the Microsoft Ecosystem, especially in the SharePoint space, you’ll likely be aware of the recent brouhaha surrounding a marketing campaign brought to life by independent software vendor (ISV) AvePoint.
In the campaign, AvePoint — a privately held (see later) software business founded in 2001 — are taking a major shot at long-term competitor Metalogix.
Nothing new in that, right? Competitors are always sniping at each other, right? Not this time around.
This time it’s personal.
When it comes to marketing, taking a shot is usually calling smack on your competitors offerings. It’s lighthearted, if heartfelt. Shots are typically made in the form of ‘our <insert product here> is better than their <insert competitors product here> because it has more/less/wider/shinier <insert comparison here>’. Unimaginative? Sure. Commonplace nonetheless.
This time, the shot taken was a seriously aggressive example of smack talk, like nothing I’ve seen in our industry. It was simple, succinct and direct in the extreme.
‘Attn: Metalogix is for Sale’ [sic].
That’s right. AvePoint fired a salvo straight at the entire Metalogix business. They overtly stated that with Metalogix ‘for sale’, current or future Metalogix customers were at risk with a ‘dark cloud hanging over Metalogix’ [sic].
Now that is smack talk. Implication that the future for Metalogix as an entire businesswas uncertain and therefore created unnecessary risk for its current or future customers. This is a form of ‘FUD’ marketing (fear, uncertainty, doubt for those not in the know) taken to a whole new level.
Is this good marketing? I’m no marketeer, so not really qualified to respond to my own question (that said, not being a marketeer doesn’t mean I don’t have further comment which will become increasingly apparent through the post) but I do know that FUD is old hat. It’s 1980’s IBM. It’s passe.
Besides being old hat, this campaign agitated me. Why does it agitate me? Bear with me dear reader. Read on.
So is Metalogix for sale?
Like AvePoint, Metalogix is a privately held (again, see later) software business and akin to AvePoint, Metalogix was also founded in 2001 and operates as an ISV in the Microsoft technology space. Notwithstanding the difference in size of the two businesses (AvePoint is roughly three times the size of Metalogix so far as I can tell from some quick web searches) they’re pretty similar businesses in reality.
Why is this notional similarity important? Whether they state it or not. Ambitious, growth seeking, privately held companies are always ‘for sale’, especially in the tech sector. They know it. The opportunity hungry equity partnership/investment world knows it. Their wider competitor and partner market knows it. In fact, the only people that might not know it are the customers and let’s face it. Why the bloody hell should they?
Let’s look at both the actors in this spectacle and how they fit into my assertion.
In the Red corner…
Part of AvePoint was sold in 2007 to Summit Partners (a private equity investment firm focused on growth) and another part was sold to Goldman Sachs (a pretty big global financial player you’ve likely heard of) in 2014.
In the Blue corner…
Metalogix was acquired by Permira (a private equity investment firm specializing in growth acceleration) in 2014.
So both, in recent times, have had all or part of their business ‘for sale’. Fact.
The reality is that privately held businesses that are seeking aggressive or accelerated growth always have a ‘for sale’ sign up on the front lawn. In the main, this vendor position is not an ‘entire business for sale’ position, it’s generally a ‘we’ll sell you a chunk of the business for cash and advice’ position, but on occasion the position will be ‘you can have the business, lock stock’.
The key here is what constitutes being ‘for sale’ and whether, as the basis of the AvePoint campaign implies, this constitutes risk for customers (and by extension employees and partners).
What is important to understand is that this selling ‘part, some or all of the business’ approach is a valid growth strategy. It’s an understood growth strategy. It’s a strategy used by businesses of all shapes and sizes, in all sectors of industry, all over the world.
In short — it’s one method a company can utilize to grow quickly.
Does this represent risk to customers? Sometimes. Let’s examine what being ‘for sale’ could mean and how that could present risk.
For Sale ‘Lock Stock’ — The Metalogix Story
Metalogix was acquired by Permira ‘lock stock’ in 2014. It’s likely that previous shareholders, particularly the executive team, still hold a percentage of the business, but as an ‘acquisition’ it’s fair to say that Permira will now hold a significant majority of the shares in the business.
Is this risky? Not in my view. Permira are a business specializing in growth acceleration — they buy (most of) a business and then, along with the incumbent executive/management team (assuming they survive, a different discussion is required for this subject), drive growth which will benefit all.
Clearly, there are numerous examples of where a lock stock acquisition has resulted in a resoundingly negative outcome for all concerned. In the technology ecosystem there are thousands of examples of companies acquiring a competitor/up-and-comer/tech-rich start-up, taking the resources or intellectual property they want, and spitting out the remains. In this situation employees, customers and partners can get left by the side of the road in a smoldering, embittered heap and the only winner is the ‘raider’ that drove the deal. In the technology ecosystem Microsoft, Cisco, Oracle, IBM, the list of tech giants (and, to be fair — not so giants) doing this is almost endless — and generally accepted as a valid modus operandi.
Why does this happen? If we ignore the emotionless, driven stereotype of the corporate raider. Every owner (regardless of who or what they are — person, business or equity partner) has a price point for exit. If the price is right, they’ll sell. It’s in the rules of the game. It’s the spirit of the entrepreneur. It’s why successful people are successful. Knowing when to ‘get out’ is a key business skill and those that succeed know when the price is right. Customers, partners, employees and internet based commentators just need to accept this. When somebody offers you a big enough piece of cheese for your company, you’ll take it. Done deal. Laugh all the way to the Lamborghini dealership. Drive into the sunset. Fade to black.
This is the reason raiding privately held companies works — regardless of whether the raider is an industry specialist or not. Think Gordon Gekko. Think ‘Greed, for lack of a better word, is good’. We’re not supposed to like it, but we have no choice but to face it — shit happens.
Although a ‘lock stock’ sale, I’d confidently assert that the Permira acquisition of Metalogix is different from the above. Permira are not a raider. The acquisition isn’t an asset stripping raid, it’s a growth investment and will benefit customers, employees and partners in the short, medium and long term. Permira are a proven growth partner and they have, historically, invested for the long-haul.
Sure. At some point they will seek an exit. Will this be bad for interested parties? Who can tell? Common sense tells us that for Permira to sellMetalogix means that somebody wants to buy Metalogix. History tells us that most equity partner exits take one of three forms: IPO (initial public offering — ‘floating on the stock market’), on-going private sale or management buyout (‘MBO’). In general I would assert that all things being equal, in the case of Metalogix, none of these scenarios are likely to be bad for customers. An ISV that has received growth funding is typically going to be an attractive on-going concern for a future buyer. Unless they make dumb or latent product innovation decisions (which is largely nothing to do with ‘who’ owns the business) the future is surely bright for Metalogix and so its customers are safe enough.
Side Bar Note: Metalogix successfully ‘lock stock’ acquired the SharePoint focused business units of Syntergy, Idera and Axceler (in 2013, 2013 and 2014 respectively) and, with few exceptions, all concerned were happy with the outcome. These acquisitions almost certainly made Metalogix more attractive a prospect to Permira, further expanding the benefit to the customers, partners and employees retained from those previous acquisitions. Kinda playing to my point made above, granted, but facts nonetheless.
For Sale In part — The AvePoint Story
AvePoint ‘sold’ parts of their business to Goldman Sachs and Summit Partners in 2014 and 2007 respectively. Like Metalogix, these transactions were undoubtedly to enable growth, but they were, no matter how you dress it up, sales of parts of the business. Cash (or equivalent securities) went one way and shares went the other.
Clearly, when a transaction of this nature occurs, it’s broadly good news for all concerned. Incumbent management have recognized the need to inject cash to enable inorganic growth. Borrowing in the tech sector is a fools game (both for lender and borrower). Seeking investment through sale of shares is win-win.
Is it risky? If a business wants to grow, the exchange of cash and advice for shares is pretty standard and the risk to customers, partners and employees is generally pretty low. Complex deals with ratchets, funding release milestones and other contractual instruments can increase the risk, but generally for minority stake acquisitions the risk to the customer is low.
Will the partners seek an exit? Maybe. The exit pathways are similar: IPO, MBO, sell to other partner. There could well be special terms in the partnership agreements. Instruments to allow influence, resale, options to buy (more of the company) — the possibilities are only limited by the imagination of the parties involved.
The common thread in both situations is that the partners did it to make money. They’re not doing it for fun, sport or some form of philanthropic altruism. They’re doing it to generate return.
Genius or not?
On the basis of the above, AvePoint have, in my view, a teeny-tiny moral leg to stand on. This teeny-tiny leg is the only thing preventing me from calling them out as a full-on hypocrite (not that they care, and why the hells should they?).
If we take the view that the intent of their rather parochial campaign is actually based in highlighting the risk of a sale as opposed to highlighting being ‘for sale’ then their approach of selling pieces of their business, as compared to Metalogix selling lock stock, is indeed inherently less risky. This lends a small amount of credibility to the campaign, but not much. Score.
Going back to the marketing angle. I’ve stated in this post that I am not a marketeer, so not really qualified to comment on the suitability or credibility of the campaign, but what I do know is what I feel about this campaign.
It just feels cheap. It feels like lazy marketing. It feels like ‘evoca-marketing’ (I hope I’ve invented a new term, perhaps ‘evocating’ is better?). It’s marketing that is actually not focused at all on marketing product or business. It’s just there to evoke emotional response that generates debate, traffic, web hits and social media viral-ism.
If that’s the case then it worked. I’ve seen days of rumbling, dozens of posts, hundreds of social media comments and I have spent an hour or so writing this post. Heads have been turned. AvePoint are in the conversation. Score.
Does that make it right? I guess that’s about the lens you look through. If AvePoint wanted to generate a stir, it worked. From their perspective that’s ‘right’. I guess booking numbers will be the acid test for AvePoint. I’d love to see how their pipeline is influenced by this campaign. Positive or negative? I wonder.
What I can’t help wondering though, is this. Have we all been drawn in by a graduate marketing genius in Jersey City who, when staring at the Verrazano-Narrows Bridge one day, thought to themselves ‘fuck it, let’s stir the pot!’?
That said, at the end of the day, and in my view, it just feels all a bit sleazy because admitting it or not, AvePoint are just as up for sale as Metalogix.
Disclosure Note: In the past I have been compensated by Metalogix for evangelism and consulting services provided to them. I’m not employed by or currently engaged in any form of compensated activity with Metalogix so consider myself neutral in the field of play with regards to this post.