Based in Arlington, Virginia, Plateau Systems was founded in 1996 by Paul Sparta, who spun the small, early-stage learning management software division out of General Physics.  Plateau Systems took the core technology developed at General Physics and created one of the industry’s first fully-functional Learning Management Systems (LMS), usually used by human resources departments for the management and delivery of learning and training across organizations.

In 1998, Plateau acquired Sensory Computing, a small technology business founded by Ed Cohen, a brilliant education technologist who became Plateau’s long-standing CTO.  Sensory had developed a suite of tools that could be used to create and manage courses and training content online.  This helped bring Plateau and its offerings to the Web, allowing it to manage all forms of training and content delivery, from stand-up lecture to self-paced, automated online instruction and collaboration.

By 1999, Plateau had one of the most robust, enterprise-ready LMS products on the market, but only had a few million dollars in sales and was competing with well-capitalized competitors, which at the time, included companies such as Saba and Docent.  Poised for greatness and eager for growth, Plateau management sought venture capital.

As is often the case, the quest for venture capital was not easy and consumed management for a couple years. Unfortunately for the DC-based venture community, they all passed on the opportunity. The market was good for raising capital, Plateau had revenues, and they had great customers — General Electric, Bank of America, the Internal Revenue Service (IRS), and Capital One Services, just to name a few.  Despite the positives, the difficulty in raising growth capital was frustrating management.

Finally, a breakthrough occurred when one of their best customers, GE, made an introduction to GE Capital.  Soon afterwards and with the help of GE Capital, Plateau was able to attract Euclid Partners and AIG to pull together an $18 million first round. Morgan Stanley Venture Partners joined the party later and Plateau had the capital it needed to compete and grow the business.

In early 2000, Plateau Systems delivered an integrated J2EE-based talent management platform, which allowed organizations to link learning and training with employee performance to measure whether employee goals were aligned with corporate objectives.  This was all being delivered in a perpetual license software model.  In the mid 2000s, Plateau shifted its offering from a perpetual license model to Software-as-a-Service (SaaS) – aka: “Cloud Computing.” The business model shift was painful and costly, but they successfully converted their customer base to the highly valuable recurring revenue model and continued to build sales.

A fast growing software company can eat through cash quickly.  Although the initial rounds of venture capital were in the bank, the previously profitable company’s struggles with cash flow were not over.

At one point in the early 2000s, CEO Paul Sparta and long-time President Brian Murphy gambled everything by turning down what would have been a highly dilutive capital round despite facing a severe cash crunch and the prospect of potentially missing a payroll within 30 to 60 days.  But the forecasted sales in the pipeline came through just in time and the company pulled through this critical period, regaining profitability and vital positive cash flow.  The high-stakes gamble paid off.

In 2007, Plateau acquired Nuvosoft, a provider of Web-based compensation management software and integrated Nuvosoft’s functionality.  Not just an LMS anymore, Plateau was offering multiple modules within the Human Capital Management (HCM) space and now dubbed its product a complete “Talent Management Platform.”

As Plateau crossed the $50 million revenue mark, around 2008, larger enterprise software players began to take notice.  There were some acquisition and buyout discussions but nothing attractive enough to lure Plateau management and its investors into a deal.  The Plateau executives held true to their principles and continued to grow the business profitably without the need for additional outside equity capital.

Then came along the deal they could not refuse.  On April 26, 2011 it was announced that Plateau Systems would be acquired by SuccessFactors (NASDAQ: SFSF) for $145 million in cash plus $145 million in stock totaling a $290 million deal.  It was the highest valuation ever paid in the HCM space. Management’s decision to walk away from previous offers in past years paid off.

Now, in the hands of the high-flying, multibillion dollar cloud computing pure-play, Success Factors, Plateau shareholders that held their SFSF stock were once again well-positioned for value creation.  Throughout 2011, the cloud computing sector was taking off and valuations were peaking.

Despite their long dedication to the perpetual license model, the traditional ERP software behemoths, SAP and Oracle, have been beefing up their cloud offerings over the last several years.  Both were undoubtedly taking notice of the rapid growth, high activity, and lofty valuations in the cloud computing sector.

As far as large cloud deals go, Oracle was the first to strike by landing RightNow Technologies for $1.5 billion.  Oracle paid just over 6x trailing twelve month (TTM) sales which is about twice the typical 3x to 4x TTM sales it paid for companies like PeopleSoft (ERP) and Siebel (CRM).  The high valuation bar for big cloud companies was established.

Then it was SAP’s turn, and time for the Plateau/SFSF shareholders to benefit.  SAP announced the acquisition of Success Factors in December 2011 for $3.6 billion, or $40 per share which represented about a 60% premium over the previous day’s trading price and a lofty 11x TTM revenue valuation.  This all-cash transaction closed on February 16, 2012 and represents the largest and highest valued (i.e., for deals over 500 million) cloud computing transaction to date.

Not far behind SAP, Oracle struck again with its announcement on February 9^th, 2012 of the $2 billion acquisition of Taleo, another cloud-based talent management company.  This transaction is expected to close by mid-summer 2012.  The transaction’s enterprise value is roughly $1.9 billion, but that figure is net of Taleo’s cash of roughly $115 million bringing the total equity value to $2 billion.  This valuation, like RighNow’s, is about 6x TTM revenues.

Why did SAP pay so much more for SuccessFactors (11x sales) than Oracle did for Taleo and RightNow Technologies (6x sales)?  Some would argue the reason is SuccessFactor’s stellar 60% growth rate which is twice that of Taleo’s.

Whatever the reason, it really does not matter anymore to Plateau’s management, employees, early investors, and the venture capital investors that believed in this company and management team.  Together, they all scored the highest valuation in HCM history and then, less than six months later, the largest and highest valued deal in cloud computing history.  The long wait for liquidity is over, and patience and hard work have paid off. Well done.

We spoke with Erik Ayers, VP of Marketing at MorganFranklin Corporation, about his company’s new website Pivotal PlaysTM in Business & Government. The financial management, performance improvement, and national security solutions provider launched www.pivotalplays.com in the fall of 2010. Just like play-of-the-game highlights in sports, Pivotal Plays features game-changing decisions and innovations in industry and government. The action-packed site offers readers real-time information on key players in the marketplace through business news stories, Twitter updates, and “Pivotal Play of the Game” video highlights from Comcast SportsNet.

Q: Tell our readers more about Pivotal Plays. 

The website showcases organizations and personnel that are making headlines by turning challenges into winning results. By aligning business and sports themes, the site recognizes key innovations and innovators—often unsung heroes who have performed pivotal plays within business and government. Using public information sources, we explain why each pivotal play was chosen and take an unbiased approach to recognizing impressive results related to management, innovation, strategy, and technology. We hope to see this effort continue to grow as we spotlight new and exciting pivotal plays in the marketplace, bringing to light positive news in industry and government. 

Q: Why did MorganFranklin see a need to launch Pivotal Plays? 

For several years, MorganFranklin has sponsored “Pivotal Play of the Game” highlights during Washington Capitals and Wizards games on Comcast SportsNet. Things like teamwork, strategy, and skill are key to winning in sports. The same holds true when talking about performance, collaboration, and discipline in commercial, government, and community-based organizations. Pivotal plays don’t just happen in sports, they happen in business and government too. 

These are challenging times, but every day, business and government organizations are making tough decisions and choosing to turn challenges into opportunities. It’s time to celebrate these pivotal plays so that business and government leaders get the recognition they deserve. We can all learn from their struggles and successes. Through knowledge sharing and best practices, more business leaders will emerge and the marketplace will continue to grow and excel. 

Q: How can our readers get involved in Pivotal Plays content and discussions?  

When you witness a pivotal play, we’d like to hear about it. Pivotal Plays is an interactive site, and we invite readers to nominate organizations or business leaders for their pivotal plays—even if you want to nominate yourself. Readers can submit a brief form describing a play that is worthy of recognition. All entries will be considered, so check the site often to see if your play makes it to the top spot. You can also follow us on Twitter at @PivotalPlays. 

Q: What are other interesting features of Pivotal Plays? 

Pivotal Plays brings together sports and business in a fun way. While you read about news in the marketplace, you can also check out videos from Comcast SportsNet showcasing the latest “Pivotal Play of the Game” highlights from the Washington Capitals and Wizards games. Or if you aren’t near a computer, tune in to D.C. sports radio 106.7 The Fan to hear about the website’s newest pivotal plays. In the future, we also envision hosting several live events to celebrate the top playmakers and pivotal plays in business, government, and community-based organizations. 

Q: What does it take to be recognized as a Pivotal Play? 

Capital One was recently featured on the site, and they continue to make pivotal plays. At the ACG monthly meeting on Jan. 21, Murray Abrams, Executive Vice President of Corporate Development at Capital One, spoke about the recent acquisition of Chevy Chase Bank. I loved when he described the acquisition opportunity as a “freak of nature.” It was a great opportunity with many positive attributes—the type of deal that doesn’t come along too often. 

Although the market was struggling, Capital One saw the value in a great brand with a dominant local presence. What’s not to like about an opportunity to acquire a dominant banking brand in one of the country’s wealthiest and most resilient economies? Not to mention the fact that Chevy Chase was in Capital One’s backyard. They could see Chevy Chase, experience it, and connect with it on a local level, and they liked what they saw. It’s clear there were risks involved with the deal—and some may still exist—but Capital One applied discipline in its due diligence and explored all angles. Although the economic environment was challenging, Capital One saw real opportunity through a forest of fallen trees. 

With the acquisition of Chevy Chase, Capital One has furthered its diversification strategy. Time will tell if they captured a pure gem, but one thing is for sure: they made a bold move in an environment where others retreated. MorganFranklin calls that a Pivotal Play.

In a recent post, ACG National Capital President, Jason Rigoli, wrote about the recent acquisitions of social networking companies in the region. He touched specifically on the acquisition of GovLoop by GovDelivery and the acquisitions of mySBX and INPUT by Deltek, which led to the rebranding of mySBX to govWin. 

Jason’s article looked at these smaller acquisitions of industry-specific social media properties as a sign that companies are seeing increasing value in social networks as a way to connect with their customer and industry communities. 

On a larger and broader scale, social media valuations continue to soar and are now likely attaining the highest valuation ranges than any other industry segment. 

Although acquisition talks fell through in early December 2010, Google’s offer of $5-6 billion for Groupon was seemingly astounding for a company that was only 2-years old. This deal would have been almost double the price of Google’s largest acquisition to date of $3.1 billion for DoubleClick in 2007  However, maybe the price is not so high given that Groupon is already profitable and generating $2 billion in sales. Groupon also maintains a coveted, established network of local businesses and is a clear leader in the emerging social discounting industry. 

And then just this week, Goldman Sachs and Digital Sky Technologies (“DST”) took a less than 1% stake in Facebook via a $450 million investment, which valued the social network at $50 billion.  DST made an earlier Facebook investment in May 2009, when it paid $200 million for a 1.96% stake. DST is backed by Russian billionaires and also owns stakes in Groupon, Zynga Game Network and Russia’s largest social networks. Facebook’s revenues are also thought to be about $2 billion indicating its valuation multiple is much higher than Groupon’s (i.e., roughly 3x revenue for Groupon and 25x revenue for Facebook). 

By making this investment, one would think that Goldman is well-positioned as the investment banker of choice for the social networking giant. Some predict Facebook will go public in 2012 which would generate many millions of dollars in fees for Goldman as lead underwriter and bookrunner. In addition to that potential assignment, Goldman is thought to currently be forming a Facebook investment vehicle to raise an additional $1.5 billion from its wealthy clients. 

All this deal activity driving social media valuations should also have a positive effect on the general technology deal market. Technology M&A is expected to increase in 2011 and is off to a good start given some of these recent announcements. 

In an interview on Bloomberg, James Woolery does a nice job of connecting the dots between the social media deal activity and technology M&A. In addition, he highlights some of the other factors expected to drive technology deal activity in 2011, such as excess corporate cash, higher valuations leading to motivated sellers, and pent-up private equity demand.

The US Department of Defense (DoD) has a problem.  Given the global supply chain, how can the Pentagon protect its sensitive trade secrets and technology from slipping into foreign hands? How can the Pentagon also ensure that key components to weapons and other national security systems are not compromised?  Given the reliance of our nation’s largest prime government contractors on offshore partners within the global supply chain, ensuring technology protection and supply chain continuity is a complex challenge.

To address these concerns, a relatively obscure provision in the 2011 Defense Authorization Act (S. 3454) known as Section 815 has been proposed.  To better manage supply chain security risks, Section 815 would empower government bureaucrats to subjectively cut suppliers out of the DoD supply chain if they were deemed a risk.  True, some legitimate security risks would be eliminated, but at what cost to small business suppliers competing in an open market, large prime contractors trying to reduce costs and operate efficient supply chains, government agencies dependent on these contractors, and ultimately the US taxpayer that pays for all of the above.

But there is more to worry about than just the potential cost.  Typically, bidding disputes are subject to review by the Government Accountability Office.  However, perhaps the most troubling aspect of Section 815 is the lack of transparency of decisions to disqualify bidders and also a potential prohibition of bid protests, providing little to no accountability or remedy to contest wrongful determinations.  The government claims it cannot provide transparency without revealing classified national security information, which is a fair point.

An article in The Wall Street Journal reported that Section 815 will allow government agencies to set qualification requirements for contractors, consider supply-chain risks along with other factors such as cost and qualifications, and broadly allow government officials to exclude suppliers as they believe necessary.

Section 815 is not a small measure and will affect many tens of billions of dollars in government spending.  All of the major prime government contractors rely on international suppliers who may, under this provision, become excluded from the supply chain.  Scott Amey makes several good points on this topic in his blog post on Project On Government Oversight (POGO).

Although Section 815 powers appear overreaching in their current form, there does seem to be a fundamental need for additional risk management.  Overall globalization of the supply chain has many positive aspects including increased competition, efficiency, and cost reduction.  However, such globalization also allows potential adversaries expanded opportunity and access to critical national security and weapons systems. 

This “national security vs. open-market competition” issue begs an analogy with the  “airport security vs. privacy concerns” debate that is occurring now as well.  The world is changing rapidly and security is a complex, ever-changing issue.  How does America protect its citizens while maintaining core freedom and capitalism values?

By Braun Jones, Partner, WWC Capital, LLC

When two companies combine, one of the most critical keys to success is a successfully executed integration. Regardless of how similar the two companies are when the deal is consummated, it is a complex and challenging process to maximize results of the union.

One item that is sometimes ignored or forgotten during a merger process is information security. Now more than ever and increasingly in the future, IT is a critical component in virtually all companies. During the early phases of a deal, decisions are made on how to bring two IT environments together to promote successful business integration and increase overall corporate efficiency and productivity moving forward. From a security perspective, the posture of each organization can be greatly disrupted during a merger and these changes can cause confusion around long-established business processes and result in the introduction of new risks and vulnerabilities to the overall organization and IT infrastructure.

Recently, I read an article in GovInfoSecurity that highlighted the unique challenges faced by CSOs during the M&A process. As we all know, companies have different security practices. Some companies are willing to take more risks when it comes to security or simply do not know what risks they face. Other companies are more risk averse and more knowledgeable. So, when companies of differing opinions and capabilities come together, it is necessary to quickly find common ground.

The article provided six tips for managing security issues during the deal:

1. Plan and get involved: Develop a solid plan and roadmap of critical data elements holding high-risk implications, including customer account information, social security numbers, employee and customer records and proprietary information. This will produce a data management plan that can be vetted by all parties. The privacy officer must further understand who the key entities are on each side with oversight and control of information.
2. Streamline the process: Establish a simplified process to know what critical data elements are there, what regulations are effective and play an active role on the acquiree side, what type of security and IT controls they have and chalk out details on how the data needs to migrate.
3. Constantly communicate: Establish a constant flow of communication on both sides regarding questions such as: Who will manage the data? Who is responsible for which data on each side? How is the control structure and impact of regulations on both sides with respect to data privacy? Who will participate in data conversions, testing and dry runs? Who is responsible for communicating with customers on what’s happening?
4. Understand the infrastructure: Develop an understanding of the technical controls environment of the acquiree or the merging organization to know where the gaps are with respect to data privacy.
5. Understand the legal aspects: Focus on what the privacy policies are on both sides. Look into details of privacy notices handed out to clients. And understand the commitments made to customers.
6. Educate: Schedule training and awareness programs for employees and customers of the organization. From a customer’s perspective, privacy officers need to address what’s happening to their account information. How soon can they access their online accounts? When are data conversions taking place? What measures is the company taking to protect their information? All parties need to be educated on new functions and information disclosure procedures to avoid being the target of phishing scams and other fraudulent activities.

IT and cyber security are increasingly critical to the enterprise and should not be an afterthought during the M&A process. What tips would you include on this list? Drop us a comment and let us know.

By Braun Jones, Partner, WWC Capital Group, LLC

Many people think that when a company is sold, the CEO and other executives walk away with a big, fat payday or golden parachute. So much money, in fact, that the executives could retire or at least live very comfortably without working for several years.

Those of us involved in the deal process know that this is not always the case. In fact, it happens much less frequently than one would think.

Last week, I was intrigued by a blog post by The Wall Street Journal. According to the post, most CEOs who sell their companies come out of the deal at a loss.

Even when shareholders receive a substantial premium, few CEOs (less than 15% in fact) would do better selling their companies at a 25% premium than they do with their existing pay packages. This is based on analysis of compensation packages (including equity, value of expected future pay and pension) for CEOs of companies in the Standard & Poor’s 1500 index by compensation consulting firm Shareholder Value Advisors.

The post pointed out that the loss of expected future pay for CEOs and the option time value would more than erase any gains on equity and on the spread between the option exercise price and the buyout price.  These findings also support the notion that executive pay is excessive and out of control – a hot topic over the last few years.

Even if executive pay is too high, the following data are somewhat surprising. Only 15% of CEOs would be wealthier if they accepted a 25% premium offer and left the company, according to the analysis. Even more surprising is that the data also showed that most CEOs, nearly 80%, would be significantly worse off if their companies were acquired at a 25% premium. However, in almost all cases, shareholders would still likely be better off. This provides even further evidence that excessive executive pay may lead CEOs to make decisions to benefit their own interests, rather than those of the shareholders.

This brings me back to my point of the golden parachute. Do they still exist for CEOs who sell their company? I have seen less of this than in previous years, although sweeteners are often baked into a deal if the CEO is seen as a key executive that the buyer wants to retain. It seems to me, based on this data, that selling a company no longer creates a tycoon unless the CEO already owns substantial shares themselves. It’s no wonder CEOs often hold out for better deals.

Few CEOs are going to accept deals that leave them poorer than they would be to go to work every day, unless of course they have the shareholders interests in mind first.

Have you seen any acquisitions lately where the CEO is not retained, has done worse my accepting a deal, but did it for the benefit of the shareholders?

By Braun Jones, Partner, WWC Capital Group, LLC

Lately, the market has been buzzing due to an increased number of mergers and acquisitions being announced. A few weeks ago, we were asking whether or not “merger Mondays” would continue. And, well, as we suggested, they have!

During the past two months, companies across the country have been spending the cash reserves they have been accumulating since the beginning of the recession. According to data from Thomson Reuters, August 2010 had the most M&A activity in more than a decade. Why? One reason is sellers are entering the market at a record pace trying to beat a potential increase in tax rates as George Bush’s tax cuts expire at the end of 2010. Secondly, with organic growth slowing and excess cash on corporate balance sheets generating low interest returns, executives are acquiring to increase their returns on invested capital and enhance growth.

There’s been a plethora of articles written about this sudden surge in M&A, discussing everything from valuations to strategy to directional market trends. Recently, I came across an article in the Gallup Management Journal regarding the benefits of engaging employees in the M&A process. Sometimes in froth deal environment, due diligence and integration take a back seat which can hurt deal success rates.

Many deals ultimately fail because integrating two companies is a complex process. The better the two companies can keep their employees engaged in the process, the greater the chance for deal success. There’s no question that with M&A comes change. However, according to the article and we know from experience, there are methods for enhancing employee engagement throughout an M&A process mostly centered around solid internal corporate communications plan that is well-executed.

When change is inevitable, keep in mind that an informed and motivated staff will help keep them dedicated to the growth and prosperity of a company and the long-term success of a successful M&A deal. Uncertainly is a killer. If you’ve recently completed a transaction, drop us a comment and let us know how you kept your employees engaged and managed internal communications.

By Braun Jones, Partner, WWC Capital Group, LLC

Most middle-market business owners work very hard for many years to build value in their business hoping to one day cash in and realize the fruits of their labor and risk-taking. Although some companies go public, are merged, or are liquidated, a successful “exit event” typically comes in the form of a “simple” sale of the company to one of two types of buyers: a strategic buyer (i.e., a corporate entity with a strategic interest in acquiring) or a financial buyer (i.e., an investment fund managed by professionals with the incentive to make a return on investment). 

However, is selling a business ever really that simple?

No matter what type of buyer it is, a financial or strategic, there are some common mistakes business owners make that can prevent maximizing the complete success of a desired outcome. Although business owners are generally expert in operating their own companies, the world of mergers and acquisitions is highly complex – full of tricks, twists, and traps – and new to many entrepreneurs. 

To best navigate treacherous M&A waters, certain experience and expertise is required in multiple disciplines including finance, valuation, legal, taxation, accounting, project management, negotiation, and marketing, as well as a broad working knowledge of market dynamics, competitive landscape, and industry contacts. Without a firm grasp of all of these essential components, costly mistakes may be made that can reduce consideration, complicate terms unnecessarily, or even kill deals completely.

Out of the many dozens of M&A transactions I have been involved with and countless war stories I have heard from my peers, the following list comprises the most common M&A mistakes business sellers make.

1. Overestimating or underestimating value: Before selling a business, it is imperative to set expectations properly by gaining an understanding of a reasonable and realistic range of value the market is likely to support. 
2. Selling at the peak or end of a cycle: As with owning stocks, it is human nature to want to keep a business when it is performing well and sell it when it is doing poorly. To get the highest value, business owners need to convince themselves to sell when the business is performing at its best and its future prospects are brightest. 
3. Failing to plan for taxes and estate: Business owners need to prepare and execute a detailed personal financial plan well in advance of selling a business. Strategies can be established early on that can minimize the impact of or defer taxes that can yield millions of dollars of savings. 
4. Focusing on price and not terms: M&A deals are typically complex with dozens of negotiable terms that can have a material impact on outcome. Although valuation and price are very important, deal structure and other terms should receive equal attention and scrutiny.
5. Failing to take a buyer’s perspective: As with any negotiation, it is often important to understand what the other party really wants. By gaining this knowledge, one can often negotiate a better deal for themselves by determining what is most valuable to give and easiest to take. 
6. Failing to lock in key personnel: Most buyers will want some assurances that key employees will be sticking around long after the sale is completed. Make sure key employees are incentivized and willing to stay around for at least a couple years. 
7. Keeping poor accounting and corporate records: Well organized accounting (typically audited financials) and corporate records are required to get the best deal. If the books are messy and inaccurate, due diligence will be much more exhaustive and the deal may even get killed.
8. Failing to seek professional assistance: Getting professional help from lawyers, accountants, estate and tax planning professionals, investment bankers, and valuation pros typically more than pays for itself in the long run.
9. Underestimating the required time and complexity of issues: M&A deals are complex and time consuming. Business owners who try to do it themselves will often miss important or even critical details. In addition, business owners must be careful to not lose focus on business performance during this critical period.
10. Covering up problems that may come back to bite: Most problems are discovered in due diligence so it is important to make them known up-front. Not doing so can create distrust and likely will result in changing price and deal terms once discovered. 

Do you agree that these are the top 10 mistakes that business sellers typically make? Please comment and add your thoughts. 

By Braun Jones, Partner, WWC Capital Group, LLC
 
When you think of big brand mergers and acquisitions, a few come to mind. FedEx and Kinko’s. HP and Compaq. Microsoft and Hotmail. Procter & Gamble and Gillette. US Airways and American West. As well as the infamous TimeWarner and AOL.

Unfortunately, developing a brand strategy is often overlooked by dealmakers. But, according to a recent article in Mergers & Acquisitions, brand strategy is a powerful lever in supporting a deal’s objectives, as well as adding to the value created by the deal. The article defines four options that business leaders use to choose the brand:

1. Create a new name for the new entity (such as Bell Atlantic and GTE becoming Verizon Communications Inc.)
2. Using one brand for the new entity, abandoning the other brand (such as US Airways/American West becoming US Airways)
3. Use both names together (such as MorganStanley SmithBarney)
4. Use both names separately (such as TANDBERG, now part of Cisco)

 
These brand options can be determined on a continuum between how tightly or loosely the dealmakers want to integrate the two companies. According to the article, on one end of the continuum is a very tight integration of the brands, with new goals, etc. that will emerge following the deal. On the other end is very limited integration with little change in either entity. Across this continuum, there are four branding options as outlined above. These include: 

1. At the tight integration end of the continuum, a brand new name is in order for the new company to signal its new future.

2. Next on the continuum is the brand strategy that promotes one of the companies over the other. With this approach, the name of one of the companies is adopted as the name for the newly combined entity. This is also a common strategy if one of the brands is tarnished such as JP Morgan Chases’ acquisition of Bear Stearns or Barclays’ acquisition of Lehman Brothers.

3. Further down on the continuum, the brand strategy for a looser integration involves keeping both of the previous names but joining them somehow. This is the case when it is a “merger of equals,” the two names might simply be combined in a co-branded approach. A similar approach that is used more with acquisitions is when the more established company brand endorses the other company, as in the TANDBERG/Cisco example. This is also a common approach when the two entities are in different as opposed to similar businesses.

These dual-name approaches are sometimes used as transition strategies; such was the case with the FedEx Kinko’s brand which is now FedEx Office. With this approach, a company’s long term plan is to adopt one of the names, but dealmakers postpone the dramatic change to increase the likelihood of their eventual acceptance of the combination.

4. At the loose integration end of the continuum, the new entity may continue to use the two brands. With this approach, dealmakers need to determine whether or not there will be confusion or other detriments with customers. If not, it might make sense to keep the brands names in tact.   

If you’ve worked on an M&A transaction where the resulting brand was an issue, drop us a comment and let us know what the considerations were in determining the final approach to brand for the newly formed entity. 

By Braun Jones, Partner, WWC Capital Group, LLC

A merger or acquisition is a complex and difficult process that has many moving parts and obstacles for the senior leadership team to overcome or navigate around. Even when done correctly, with careful due diligence, proper internal communication, and all of the tips for a successful M&A adhered to, many companies fail to consider a significant and important aspect of the merger and often pay the price when the dust settles.

What is this elusive but critical element that so many companies fail to account for? It’s the much maligned and oft ignored IT department.

Gartner recently released an analyst report that broke down the M&A process into five critical integration phases:

• The Due Diligence/Planning Phase: Sketching out the basic plan of action.

• The Welcome/Signaling Phase: Companies implement a limited number of visible changes to signal the new reality the merged organization brings.

• The Initial/Commercial Phase: The most urgent practical changes are instituted.

• The Main Integration Phase: Most of the big process and system changes are executed.

• The Reap-the-Benefits Phase: The remaining benefits such as cost synergies or increased market share are harvested and monitored.

For a successful merger, the CIO and IT departments need to play a critical role during all five of these phases, just some more than others. This is because, according to Gartner analyst, Dave Aron, “integrating people, operations, information, and processes requires significant technology investments.”

With 21^st Century companies, the dependence on technology and IT to the everyday operations cannot be understated, and integrating the disparate systems of a company that is being absorbed or merged with another is paramount, especially in the early stages. Unfortunately, as CIO reporter, Thomas Wailgum, writes, the CIO and IT departments are often relegated to mop-up duty in later phases.

The Gartner report, which walks companies through a phase-by-phase blueprint for the role of the CIO and IT during M&A, is available here for registered and interested Gartner.com users.

Have you recently undergone an M&A deal and felt the harsh sting of overlooking IT in the process? Weigh in and let us know about your experience.