On January 3rd 451 Group announced the acquisition of Yankee Group from Alta Communications (private equity firm) for an undisclosed sum. All Yankee Group employees are to be retained and the company will operate as an independent division of the 451 Group adding the 18 analysts (and 7 affiliate analysts) of Yankee Group to the roster of some 60 analysts at 451 Group. Terry Waters will stay on as CEO of the new 451 division.
You can find some interesting analysis by Duncan Chapple regarding the financial background to this acquisition at www.analystequity.com/1853/yankee-group-saved-by-451-acquisition. Duncan’s perspective is reflective of the recent re-structuring at Yankee Group and provides some good historical context to Yankee Group’s past ownership.
Yankee Group Restructuring
Yankee Group has gone through a major re-structuring and change of direction since 2010, when Terry Waters was appointed as CEO (after Emily Nagle-Green stepped down). From 30 analysts at that time, the company has pared down to 18 full time-analysts (including 5 data specialists) and 7 affiliates including former staff. Five of the team (including one affiliate) are based in Europe, the rest are based in the Americas. The company has gone from an advisory and opinion business model (mixed research and consultancy) to a data-centric research and advisory model concentrating on subscription services. Historically Yankee Group’s customer base has been biased toward telcos and telecommunication software and services providers. With the transition to their focus on mobility, Yankee Group more recently have been seeking to increase sales to the wider enterprise and mobile ecosystem (ie payments, apps, cloud) market but penetration rates to-date will likely be limited.
In addition to the business model change the company has also transitioned from being a communications generalist to a specialist in mobility culminating in the launch of their Mobile Advisory & Planning Services (MAPS) product in May of last year. This is a hybrid product combining targeted research and data with regular daily and weekly analyst commentary and insights. The research focus is now the mobile ecosystem with an agenda covering topics such as mobile money, mobile broadband, mobile and connected devices, mobile applications and the cloud.
The New 451 Group Structure
The 451 Group will now be split between three independent divisions: 451 Research, Uptime Institute and Yankee Group. The 451 Research focus has been on Enterprise IT innovation concentrating on technology segments such as cloud, eco-efficient IT, enterprise security, information management, data centre technologies and internet infrastructure services. The 451 team have provided some limited coverage of mobile infrastructure. How this will integrate with the new Yankee Group Services is yet to be determined but Yankee Group’s CEO, Terry Waters, expects there will be opportunity for collaboration in research versus any transition of topics or resources. The 451 Group sees mobility as a major driver of innovation in business and technology markets globally and believes its impact in the evolving enterprise and broader consumer IT marketplaces will fundamentally shape the future expansion and strategy of Digital Infrastructure, a key focus of The 451 Group.
So, from an AR’s perspective a couple of key questions. If I subscribe to 451 Group or Yankee Group today (or both) what changes (and what is likely to change)? Is this likely to put Yankee Group onto a more stable footing and make them more relevant?
Conversation with Terry Waters suggests that the answer to the first question, in the near term at least, is nothing changes. Yankee Group contracts remain separate and there is no merging between the sales teams. The Yankee Group back-office staff will merge with those of the 451 Group so there may be some logistical changes but for now expect nothing more than that. Longer-term is more questionable. The 451 Group do have a good track history with M&A both as separate independent divisions (e.g. Uptime Institute) and as fully-merged businesses (e.g. TheInfoPro – which was initially set up as an independent division and then fully merged into 451 Research, ChangeWave Research). The research focus of all parts of the combined entity is data-centric versus opinion-focused research. The 451 Group ownership also adds some marketing muscle to Yankee Group to help them more clearly articulate the new mobility focus. Whether 451 Research and Yankee Group ultimately merge however is likely more a question of the relative buying audiences, The 451 Group’s own long-term objectives (i.e. as an independent research business or to get acquired themselves) and the relative success that the independent model delivers.
A Stronger Yankee Group?
What about the related question of the long-term viability of Yankee Group? Certainly the new owner has a good understanding of the research model, both companies have a mostly vendor-facing business (albeit that 451 Group derives some significant revenue from the investment community), 451 Group likely has acquired a team of strong assets at a relatively low price, and overall has demonstrated some real ability to build a competitive research company in a market where it is very difficult to make real profit from research (unless you are very small or very big). With over 200 staff, the combined 451 Group is now of a similar size to Ovum, lagging IDC, Forrester and Gartner in analyst numbers but getting ever more visible on the radar as one of the few midsize advisory research firms that is profitably growing. For now this seems like a good landing place for Yankee Group and I expect will likely stem the flow of talent out of the company as well as allow the MAPS product offerings to fully develop for clients. Now may be a time to re-visit Yankee Group if mobility is your area of product/services but do not expect any radical transformation or near-term shift in investment from today.
Key Takeaways for AR:
- Expect no change in the near-term in terms of account manager, contractual terms (including seat access) or research coverage. You may wish to contact your account manager to confirm your own specific details.
- If mobile telcos and telecom service providers are a key market review the revised offerings from Yankee Group and ensure that you are keeping their analyst team briefed. We would recommend also reviewing ABI Research, Current Analysis and Juniper Research for other specialist insights in the area of mobile.
- Regularly review the situation with The 451 Group to see whether any structural changes take place which may create opportunities for combined contract negotiation between 451 Research and Yankee Group research.
Post written by Simon Levin, IIAR Board Member
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