It is well understood that partnerships are one of the most effective means to accelerate revenue growth in a SaaS software business. Formal reseller relationships are often the most fruitful, as your product explicitly complements your partner’s product or service offering, helping to enable their sale. When the synergies are particularly clear, and if the partner company is acquisitive, then sometimes the conversation will eventually turn to the prospect of combining your firm with theirs through acquisition; your partner prefers to lock in the synergies indefinitely and make the relationship permanent. Prospective acquirors are almost always larger with a broader sales reach, and they plan to harness synergies by pushing your offering into other markets or geographies, furthering the level and depth of integration by tapping your development team to integrate your product directly into their platform, and beyond.
The question is: what if you could run this ‘partner then be acquired’ strategy in reverse? In order to explain the idea, we need to re-introduce the idea of a market check. A market check appears very much like a full sale process and the preparation is nearly identical. The key difference is that in the one-page teaser email distributed to prospective buyers, we explicitly state that we are checking the market for interest in the context of surfacing strategic alternatives, which may include partnership, investment or outright sale.
Coupled with the anonymity of a teaser (a teaser does not identify your company by name), a market check process is the most effective means to instigate dialogue with the market without declaring your company for sale. They are also a great way to open doors with prospective partners. In the case of a recent mandate, we focused our target list on strategic partners in a complementary product category. The adjacency is the most obvious ‘downstream’ complement to our client’s solution, and customers almost always need to purchase both products together.
To date, as a direct consequence of our market check process, our client has papered partnership agreements with two new partners. Reseller partners are a critical and growing component of their revenue, representing over 30% before these new deals were signed. With a 12 – 18 month exit window, our client is also ready to go to market in a full sale process with an expanded list of interested strategic buyers and enhanced revenue growth.
Please let us know if you’d like to setup a meeting to learn more about how Cardin Partners organizes and runs a market check process.