Microgen Financial Services and Touchstone Wealth Management announce the completion of their merger. This follows full clearance from all relevant authorities.
The deal was first announced in November 2019, which followed a period of due diligence by Silverfleet Capital. Silverfleet have provided the funding for the merger. Read more on my blog from 25 November.
The latest announcement was made simultaneously by both businesses with a press release on 4 February. This combined the merger completion with news that one of the largest global providers of Trust, Fund and Corporate Services, IQ-EQ, has signed an agreement to extend their relationship to use Microgen software across all its global offices.
Keith Hale, Executive Chairman: “I’m delighted that the merger has completed, so we can continue to quickly progress the integration, enabling us to service our clients in the best possible way. I’ve already been very impressed with the great chemistry between the teams. Everyone shares the joint goal of providing innovative, resilient, secure and modern technology to the Corporate Service, Trust and Fund Administration market. Signing the extension with IQ-EQ is a great example of how we can support our customers to grow globally.”
Here is a short video of a chat between Keith, Peter Le Brocq, Touchstone MD, Robert Browning, CEO of Microgen.
But what does this all mean for the industry and what is likely to happen next?
Here are my thoughts on what we might see over the next few months. this is based on my knowledge of the industry and informal conversations I’ve had with others familiar with the transaction,
Note: these are my opinions only and are not offered as advice.
A New Name
The PR guys are probably working on this right now. We can expect a new brand to be announced in the very near future. It won’t include the names Microgen or Touchstone (or ‘Micro-Stone’ as I have been known to call them in the last few weeks!). Beyond that your guess will be as good as mine.
Combined sales teams
It makes no sense for 5Series and NavOne to compete against each other. I suspect the sales teams will look critically at each opportunity and assess which is the best product to lead with.
I’ve seen this happening already when talking with a staff member from the new company. He indicated a potential client requirement would be better served by, what was, their competitor product rather than their own.
In the short-term, where a current prospect has shortlisted both 5Series and NavOne, we can expect to see both pre-sales team working together. They will use this as an opportunity to compare their approach and combine the best of both.
This is in stark contrast to previous acquisitions by Microgen. They immediately shut down the sales team from the acquired company.
Rationalisation of licence models and fees
Microgen sells software on an annual licence fee (ALF) basis only. Whereas Touchstone offers both perpetual and subscription based licencing models.
Microsoft is already moving away from perpetual licences, but until recently Touchstone have been selling NavOne on this basis. I expect this to cease. The only way you will be able to purchase software from the new company will be on an ALF / subscritpion basis.
An ALF model provides recurring revenue for the software vendor. Some say this makes the product more expensive over the long-term. However, I prefer to think in terms of value. An ALF model gives the vendor more certainty over future income. In turn it allows them to continuously invest in the product and keep adding value through regular updates.
Improved customer service
Both companies have suffered from mixed customer service over the years. This is partly down to management and partly due to insufficient resource. Both are victims of their own success and put more resource into looking after new clients to the detriment of existing ones.
Keith Hale has a lot of experience building successful software companies, so I expect the combination of his leadership and the greater resources of the combined business will lead to improved customer service for all clients.
The efforts to transform customer delivery are likely to extend to project management and account management. This should lead to projects that are delivered more quickly, with existing customers getting more value from their investment in the software.
Greater focus on Product
Microgen has been transforming its software development and product management teams over the last few years, whereas Touchstone has a greater bias towards service delivery and business consultancy.
Expect to see more focus on products that support the core 5Series and NavOne infrastructure. Where possible the new company is likely to develop products that can co-exist with both 5Series and NavOne. We are likely to see more modular products rather the behemoths of the ERP-like 5Series and NavOne of today.
This will make future software releases easier to manage and upgrade. Many larger organisations struggle with keeping up to date with regular software releases because they are too big to regression test more than once or twice a year.
What about 5Series vs NavOne?
This is the burning question and one I am asked most often. Is 5Series development going to be stopped or slow down? Or, given the investment Silverfleet have already made in Microgen, will NavOne be absorbed into the business and disappear like Jobstream and Unity have?
My honest answer is, I don’t know. But what I expect is neither of these scenarios.
This merger is nothing like the earlier acquisitions Microgen made, and both 5Series and NavOne are excellent software products (albeit each with their own flaws). My prediction is that both will be retained and developed in parallel, for at least the next 5 years. Over this period the market will continue to change and the two products may find their own level where one may dominate.
We also have to consider what actions the Microgen and Touchstone’s competitors will do and if there will be any challengers to their new position as the biggest player in the market.
Rest assured, I will continue to be active in the market and bring you any updates as and when I hear them. In the meantime, if you are in the market for new software, or you would like advice on how best to invest in technology then please get in touch. Use the contact form below or message me via social media or email.