‘Ideal’ buyout dodges corporate culture clash

Driven to grow at Internet speed, legions of deep-pocketed companies have been merging and acquiring at a breakneck pace. While billion-dollar deals have become commonplace, no company wants a merger to morph into a battle of words and corporate cultures, i.e. Qwest/U S West.

That headline-grabbing deal certainly has reinforced the viewpoint of many recently acquired Boulder County companies: Choose carefully.

“Overall, I think we were pretty lucky – and also pretty smart,” noted Kevin Schaff of Update Systems Inc., a Boulder-based customer relationship management specialist that was acquired by Denver’s Webb Interactive Services Inc. (Nasdaq: WEBB) in January.

SPONSORED CONTENT

The many benefits of simple, coordinated healthcare

Kaiser Permanente combines health care and coverage in one connected system to maximize employee health and minimize employer costs.

“Our cultures match pretty closely, so (the acquisition) was pretty painless,´ said Schaff, Update’s founder and former president who now serves as vice president of business development for Webb. “Coming from a small start-up, you have to wear a lot of hats,” he said. “It was really nice to take business development and focus on that. I don’t have to spread myself as thin.”

Prior to the merger, Schaff said fund raising required a majority of his time. “We were constantly worried about resources,” he said. “We really saw (the acquisition) as an opportunity to go public without going through the IPO process.”

The biggest post-acquisition change? “To actually have a boss,” Schaff said, laughing. “That was a pretty interesting transition, taking a team that you had built and essentially handing it over, meaning they no longer report to me.”

Before being acquired by San Jose, Calif.-based BEA Systems Inc. (Nasdaq: BEAS) in August, Avitek Inc. was a Boulder-based software developer with 10 employees.

“There’s a lot of differences between being a small, privately held, organic growth company and being a small group in a fast-growing, public, Silicon Valley company that has grown through acquisitions,´ said Tim Miller, Avitek’s founder and current vice president of BEA’s Accelerated Development Center. “You get brought to the party on things that you never dream of doing with a small company. Instead of systems that talk to hundreds or thousands of users, now we’re working on systems for tens of millions or hundreds of millions of users.”

Before the acquisition, Avitek declined a local offer $6 million higher than what BEA paid. “We decided not to merge with them because there was a cultural mismatch between us and them,” he said, involving more travel than Avitek’s employees desired. “(BEA) has stayed true to the center-base development paradigm. That was the key factor.”

Miller said the transition has been smooth and change has been minimal. “Our foosball table gets more use than it had,” he joked, “but now we’ve got a pinball table, too.”

Likewise, the September acquisition of Louisville’s THOR Inc. by Englewood-based The Trip.com Inc. has been “terrific,” according to Stephen Baker, THOR’s former president and current vice president of travel operations at Trip.com. “The two cultures have been enormously compatible,” he said. “There’s been a major effort for Trip.com to take advantage of some of THOR’s contacts in the travel industry and our customer base.

“Nothing has changed internally here whatsoever,” Baker continued. “I’m sitting at the same desk in the same office and meeting with the same people.”

Shortly after the THOR/Trip.com deal closed, groups of employees made trips from Louisville to Englewood and vice versa. “The integration was handled very skillfully,´ said Baker, by committees comprised of employees from both companies.

Nearly seven months after acquisition, Baker said the company is still in a transitional phase. “There’s still a lot of things we have to do.” Meanwhile, The Trip.com was acquired by an even larger travel company, Rosemont, Ill.-based Galileo International Inc. (NYSE: GLC) in February.

Besides the blending of corporate cultures and the transitions that follow, another common merger result is financial freedom for the acquired company’s employees.

Andrew Currie, founder of Email Publishing Inc., retired eight months after his company was acquired by MessageMedia Inc. (Nasdaq: MESG), now based in Boulder, in December 1998. “I viewed it as a relay race, and my leg was done,” Currie described. “The company was in good hands.”

In the time since leaving, “I’ve been learning a lot about having more money, which I never had before,” Currie said. “The money changes how you turn around and approach work again.” Besides investing and serving on the boards of various start-ups and non-profits, “I’m doing a lot more traveling and spending a lot more time with friends and family,” Currie said. “I’m leaving today for the Bahamas.”