5 Ways M&A Can Harm Your Payments Partnership

Protect your SaaS business from payment partner acquisitions. Discover key factors to monitor for long-term success and stability.

A successful payment partnership is crucial to the growth of your SaaS business. Due diligence is essential to ensure a partner offers the necessary features, functionality, and support. Beyond integration speed, brand recognition, customer rates, and revenue split, you’ll also want to evaluate a partner's platform architecture, innovation roadmap, and reputation.

However, in today's dynamic payments industry, M&A activity poses a significant risk. The hard truth is that when you establish a payment partnership, investing time and resources into integration and associating your solution with the payment company’s brand, there’s no guarantee that the relationship will continue to thrive if another company acquires or merges with your partner’s organization.

After M&A, it is common for SaaS companies to experience:

Loss of knowledge about your solution and customers.

Gallup reports that after a merger or acquisition, 47 percent of key employees leave within one year, and 75 percent leave within three years, often because mergers lead to redundant roles. If your account manager leaves the company, you may work with a new contact who has to navigate a learning curve before becoming a valuable collaborator and resource to you. Additionally, you may unfortunately find yourself without a dedicated point of contact, just a “number” dealing with different people each time you call, making it more difficult to manage the integration and the business relationship. The worst case scenario, however, may be that your customers call for payment support, and there is no longer any knowledge concerning your software and relationship.

Loss of deep market expertise.

The best payment partnerships for SaaS companies share the same market focus for their collective solutions and services. Ideally, the partnership is complementary, creating a synergy of deep knowledge of market pain points and objectives to develop solutions that will provide real value and a competitive edge.

After a merger or acquisition, a payments company’s priorities may shift away from the SaaS company’s focus, particularly if the software is designed for a niche market. As a result, the competitive edge, once established, loses its potency, leaving your solution vulnerable.

Sunset technology.

One result of M&A activity in the payment industry is technology consolidation. A SaaS company’s payment partner may acquire a company for new technology and capabilities and then sunset some of its existing tech stack, resulting in you and your customers needing to migrate to a new platform. The migration will require development time and expense, but that investment may have unclear ROI and even result in the loss of key features. Unexpected development time can also take focus away from new opportunities, stalling revenue growth.

Financial impact on you and your customers.

After M&A, a payments company may make decisions in its own best financial interests, not necessarily those of its partners. Therefore, the partnership becomes one-sided, with the payments company benefitting far more than its SaaS partners. For example, a newly formed payment partner organization can establish new terms for working with partners. This may include a decrease in the split partners receive on transactions, directly impacting your revenues.

Additionally, the new organization may increase your customers’ fees, or the company may change the fee structure. Furthermore, your new partner may have a different approach to fees that could be less clear or transparent than what you were previously accustomed to. Unfortunately, a change in fees and how the payment company charges end users can create dissatisfaction and lead to churn — not only for the payment company but also for your SaaS company.

Decrease in customer satisfaction.

Although an increase in payment processing fees will harm a relationship with end users, particularly in the current economic climate, other changes following a merger or acquisition can also negatively impact how satisfied your clients are with the solution you provide. Users may not have access to all the features they did in the past or need to pay additional fees to use them.

Furthermore, the newly formed organization may not provide options to customize a solution for a merchant’s unique needs. Merchants may also wait longer for funds to appear in their accounts, negatively impacting their cash flow. They may also find themselves contending with new policies on account holds and risk management. For example, if a merchant crosses a threshold that the payment company sets for the number of chargebacks, they could face higher reserve requirements or even lose their ability to process payments through the provider.

SaaS companies must remember that customers associate the total solution with their brand. So, any negative impact from changes to payment operations will also negatively impact your SaaS solution. To maintain customer satisfaction and a growing business, you must partner with a company that values your customers’ business as much as you do.

Investigate the Payments Company Behind the Solution

Although there’s no predicting what the future will hold, the best move is to look into a company’s history, including the average tenure of the team you’re working with. The more you know about your payments partner’s company, its business model, corporate practices, and customer and partner support structure, the better you’ll position your company in the long run.

If you’re ready for a partnership designed for your success now and in the future, contact us.