I’m preparing for a couple of presentations on consolidation in the association technology sector (including at AMS Fest, November 13-14 in Washington, DC), and wanted to share this visualization in my slide deck of how technology companies are aligning, and which ones have taken investments. This isn’t a complete view of the activity, and covers about a two year period, but it should help you grasp the extent of the consolidation. If you’re reading this in your email inbox, download the images, or click through to see the visualization.
Wild Apricot, Weblink, GrowthZone, BuilderFusion, and MemberClicks have all been part of an acquisition within the past 60 days. The number of organizations affected by these deals is around 40,000. If we assume that the average small organization affected by these deals has 500 members, we can project that about 20M memberships are wrapped up in this wave of acquisitions.
What’s driving this rash of acquisitions in the down-market AMS space? Three things:
- The Domino Effect. Since the blockbuster Community Brands consolidation in March 2017, more and more investors have been looking at the association space. Last week I attended a 300 attendee conference for a small niche of the association market and met a private equity fund manager who was there scouting out companies potential investment or acquisition. This isn’t a rare occurrence. Rarely does an association industry conference go by that there isn’t an investor or two scoping out the trade show floor for a potential deal.
- FOMO. Fear of Missing Out. With the quickening pace of M&A in our technology market, many companies don’t want to be on the outside looking in. Some technology company founders and owners see the alliances being drawn, and they fear if they don’t get into one of their own, they’ll miss out on opportunities.
- Enterprise AMS platforms are spoken for. All of the enterprise grade AMS companies are either spoken for, or are fiercely independent (though we’ve seen some fiercely independent company founders get acquired or bought out this year). There also just aren’t as many enterprise AMS platforms as there are smaller AMS players.
Implications of all this activity?
- Inevitably, some percentage of customers won’t like the acquisition, and will switch to another vendor. One industry expert estimated that in one of the larger acquisitions in the past five years, between 20-40% of the clients of the acquired company migrated to another AMS.
- New AMS platforms are cropping up to fill the void left by the acquired companies.
Two AMS platforms prevalent in the small staff association space are coming together. MemberClicks announced on November 2, 2017 that they have acquired Weblink. Read the press release. Back in May, MemberClicks acquired event registration software company, ePly, and in February 2017, they accepted a growth equity investment (amount undisclosed).
In October 2017, Higher Logic announced that it had acquired two email distribution platforms used widely in the association sector: Real Magnet and Informz. Higher Logic acquired online community platform Socious and online collaboration platform Kavi Workspace earlier in 2017. In September 2016 Higher Logic accepted a $55M round of growth funding from JMI Equity.
One of the most fascinating parts of this story is the level of orchestration that was required to pull off these deals. Higher Logic and its private equity firm were able to negotiate two deals, with two competing companies, which closed within 30 minutes on the same day, and with the two acquired companies each unaware that the other was about to be acquired. If either Informz or Real Magnet learned of the other deal, it may have blown — or severely complicated — the deals. This was an expertly coordinated pair of transactions.
These are also smart acquisitions. Email notifications are the lifeblood of the Higher Logic community platform. Higher Logic already has some of the most advanced email notifications in the market, but they are not an email distribution platform. By aligning their community expertise with bona fide email expertise, Higher Logic has created a point of leverage to dramatically improve their platform’s email functionality.
Informz and Real Magnet have more than 1,600 customers combined. This gives Higher Logic a foot in the door to sell their product to the acquired companies’ customers, and vice versa. This also brings Higher Logic’s total clientele to over 2,500.
Higher Logic is already tracking 5 billion user interactions per year on its platform. Emails delivered by Real Magnet and Informz account for another 7 billion interactions collectively. With more points of interaction to mine, Higher Logic can build an even more reliable member engagement profile for its clients.
Furthermore, Real Magnet in particular offers robust marketing automation features that fit nicely with Higher Logic’s existing automation rules. Imagine being able to kick off a marketing automation campaign based on a member’s community activity, or vice versa. The ability to induce engagement in a community based on an interaction with an email is pretty compelling. It creates a virtuous cycle of member engagement which is proven to increase retention.
The potential downsides of this deal are:
- That Higher Logic is acquiring two very similar companies. This creates uncertainty among the customers and staff of the acquired companies, and we’ve seen first hand the communication challenges this has presented to another brand in the space that is consolidating multiple similar companies. Is one product going to be deprecated, or will they be merged? Will there be reductions in force? Will the company culture change because of this? These aren’t unconquerable questions, but they do create a minor communications crisis that Higher Logic, Informz, and Real Magnet need to manage.
- That Higher Logic may have alienated other email distribution platforms with these deals. They have partnerships with email platforms other than Informz and Real Magnet. How are these deals perceived by the email platforms that are now on the outside looking in? Higher Logic has a reputation for playing nicely with everyone. Is that reputation now tarnished in the eyes of the other email platforms? How should other Higher Logic partners interpret this event? Does it foreshadow that Higher Logic would consider acquiring an LMS or a mobile app platform, for example? These also are not insurmountable issues.
All in all, I think this is good deal for Higher Logic, Informz, and Real Magnet customers. I’m very excited to see how these technologies come together to drive more member engagement.
GrowthZone, a leading provider of technology solutions for associations and chambers of commerce with nearly 3,000 customers has acquired BuilderFusion, an AMS tailor-made for home builders associations. Check out the press release.
On September 26, 2017, Personify, widely known for their enterprise level AMS platform and high-profile customers, acquired Wild Apricot, an entry level membership management system. This acquisition is in addition to the November 2015, acquisition of Small World Labs, a leading online community vendor. Personify is backed by Rubicon Technology Partners, a private equity firm with offices in Menlo Park, CA and Stamford, CT.
Because they serve mostly micro-associations (very small staff or volunteer run) Wild Apricot is relatively unknown among career association executives. Let’s fix that.
Toronto-based Wild Apricot is a pure SaaS (Software as a Service) technology company with over 22,000 customers. Personify is now boasting a customer base exceeding 30,000 customers. 21.5% of Wild Apricot’s business is based outside the US, giving Personify a foothold overseas.
This number has raised some eyebrows. An industry insider sent in this tip: “I would seriously question the number of customers that Wild Apricot and Personify are throwing around.” So I did some digging.
According to Michael Wilson, Chief Strategy Officer at Personify, the number is indeed correct and more than 50% are ongoing paying customers. Wild Apricot’s freemium model allows users to register for a free 30 day trial, begin managing their membership, and then start paying if they like the service. There’s also a completely free version for organizations with less than 50 members which is where the balance of the customer count comes from. According to Wilson, “The model of allowing a free level expands the user base of clients that can advise us on how to continually improve the product in the best way.” The CSO continued, “This is also good for the industry as it provides free software to small organizations that cannot yet afford to pay. Also, as they grow, we do too.”
Pricing ranges from $40/mo to $270/mo, so if we assume that the average paying customer is paying the $70/mo rate (the second to lowest rate) that would give Wild Apricot about $10M in annual revenue.
Their customer acquisition model is almost entirely word of mouth and inbound marketing — SEM, content marketing, social media marketing, and leveraging review sites. According to Personify, Wild Apricot has been the highest rated membership management system on technology review site Capterra for the past five years. Through these efforts, I’m told by Personify that Wild Apricot has grown 20% per year with a sales team of zero. Think about that. No sales team and about $10M in revenue.
Having no sales staff has a couple of important implications:
- Wild Apricot can devote a greater share of its resources to R&D. Wild Apricot boasts an R&D staff of 100.
- There’s no need to send sales staff to attend or exhibit at conferences and events — hence the lack of awareness of Wild Apricot among career association executives and association sector technology experts.
Because of the shroud of mystery over Wild Apricot, many industry insiders I spoke to initially scratched their heads on this acquisition. Two products, seemingly incompatible, and addressing widely different markets coming together? How does this make sense? One consultant remarked: “This acquisition only makes sense for Rubicon. It’s designed to boost top and bottom line and make EBITDA look better for the next buyer.”
But this deal is actually brilliant. Here’s why: Unlike other recent acquisitions which brought together similar products addressing similar verticals, Wild Apricot and Personify have almost — *almost*; hold on to that word — no overlap.
Some recent acquisitions in the association technology market are forcing the parent companies to reckon with issues such as:
- How to continue managing multiple, very similar platforms that serve the same customers.
- How to merge the similar platforms from a technology perspective
- How to merge the similar companies from a personnel perspective (e.g., layoffs or new roles)
- How to manage sales teams for two competing platforms under the same parent company who are competing for the same business
- How to choose which product to deprecate
- How to communicate about all of the above challenges to customers, prospects, and the broader market
Personify and Wild Apricot have no such dilemmas.
Remember that *almost*? Here’s the almost: During due diligence, the Personify team discovered that 25% of their customers have local chapters who are Wild Apricot customers. This creates an interesting opportunity: think about a huge international organization that needs a 500HP AMS to give them throttle for their complex scenarios, but their chapters just need a bike to get them around. What if those technologies played nicely together? Register for the international conference through your chapter’s website, renew your certification through your chapter’s website, international can crunch engagement data to serve chapters high-potential new volunteers, etc.
“This is an area we are really excited about,” said Wilson. “This acquisition actually helps large organizations solve the dilemma of how to bridge the data and user gap between the large national headquarters and the local, often independent affiliates.”
This deal now brings Personify’s total client base to a reported more than 30,000 organizations when including the national organizations and local entities using Personify360, Small World Community, and Wild Apricot.
Perhaps the only downside to this acquisition is the perception in the broader market rumor mill that Personify has been distracted from its core business by pursuing a deal that — despite its brilliance — seems to be a mis-match.
For those that have worked in the association market for more than a few years, you may remember that after private equity investment dollars first came into Personify in 2013, there was a period of staff churn at the company. While that initial churn generated a few critics, it seems Personify has turned the corner and their arrow is pointing up.
I was given a confidential client retention number that I can’t share, but as a former membership director, I would have been very satisfied with the number. Personify was also recently named as one of the Top 20 Most Promising Cloud Solution Providers by CIOReview Magazine in 2017. Perhaps Personify is doing better than the critics think.
My bottom line: Some of the most knowledgeable and respected industry insiders were initially conflicted about this acquisition, but have come around. Pure SaaS play companies are among the most valued in the broader technology market. In my opinion, Personify has bagged a unicorn, and I believe it has taken their competitors by surprise. I personally think that this is a good deal for everyone involved, and good for the association technology market.
Publicly traded payment technology company First Data has entered into an agreement to acquire a leading payment gateway for associations, BluePay. AMS platforms such as Membersuite, iMIS, and YourMembership all have BluePay as an option for online payment processing. First Data touts that the acquisition adds “Member Based Organization solutions to First Data’s product suite” in its press release.
Today at Higher Logic’s user conference Higher Logic announced that it has acquired email distribution platforms Informz and Real Magnet.
I’m preparing an analysis of this week’s Wild Apricot acquisition by Rubicon-backed AMS, Personify. If you’re a client or prospect of either Wild Apricot or Personify, I’d love to hear from you.
I’m also eager to hear from consultants and other vendors who work in or around the AMS market with their comments.
Remember: I accept (but not necessarily publish) anonymous tips, and you can rest assured that I will only divulge your name if you ask me to.