The Good, Bad, and Ugly of Technology Acquisitions

It is the foundation for the free market system and capitalism and it is every entrepreneurs dream; build a great technology, execute and achieve excellence in GTM, deliver fantastic value to customers and take great pride in watching your passion grow – fast.

Then it happens; the exit, the liquidation event, the ‘golden ticket’ and in a blip of your time on this tiny little rock your life changes.

Last year, after spending almost four years as the CTO of BigFix, we were acquired by IT industry behemoth IBM (IBM to acquire BigFix) for what was the largest acquisition of a private software company in 2010 (second was CA’s acquisition of Nimsoft at around $380m) and my life changed…

My experience probably isn’t radically different than most, but I have had an opportunity to reflect and now share what I learned before, during, and after the process.

The Good:

• Depending which part of the country you live in, you’re either rich or at least a lot more financially stable and independent than you were before the acquisition
• Your efforts, your blood, sweat and tears, the late hours and the impacted relationships seem validated
• Your technology – in some cases, such as BigFix – is adopted and embraced throughout the organization
• Your customers can – in some cases, such as BigFix – enjoy the benefits of the technology integrations between acquirers and the acquired, significant resources, and global reach.

The Bad:

• The acquiring company usually has a very different and sometimes very challenging culture for entrepreneurial types. Most small to medium technology companies have a fantastic culture, there is a community and bonding that forms when you invest this much time and effort into something, most large company cultures border on something between factory sweat shop cloaked in an air of civility and almost any scene from any Aleksandr Solzhenitsyn book ever written
• Many times the technology has a 18-24 month shelf-life and then it is put into something like maintenance mode. Innovation slows, product becomes less visibile, the promises of potential integrations and future strategies fade into the night like so many failed .com bombs.
• New terms and conditions, such as support contracts or roadmap commitments, can significantly change the value proposition and TCO of the technology

The Ugly:

• People will lose their jobs
• Promises will be broken
• Product will suffer
• The party is over

Aside from the general feelings of malaise that always seem to accompany drastic change, for the most part my recent experience didn’t really have any element that I would consider ugly, but that wasn’t the case when I was with McAfee/Network Associates (who have since been acquired by Intel) during their acquisition spree in the late 90’s .

Couple of quick stories:

In one case they fired/laid-off all the employees of the acquired company, problem was there was no one left who understood the code and knew where all the bodies were buried – it took almost a year to return to normal operating state.

In another case they acquired a technology then proceeded to break promises made to the acquired companies executives, who promptly left, took their team and within about 18 months had a highly-competitive product that was killing it in the market

In another case they decided to lay-off about 75% of the acquired company. On the day of the acquisition closing they asked the retained employees to meet at a local hotel conference room and they had the employees they were planning to lay-off come into the office – while once news got out all hell broke loose, developers were deleting source code, one of the IT guys locked himself in the server room and was causing havoc to the point that the Sheriff had to physically break-in and remove the employee. It was about the ugliest acquisition I have been witness to.

Everyone’s specific experiences will be different, but you will experience a roller-coaster of emotion, from joy and happiness to grief and loss, mostly though you will become disillusioned with the entire process and wish you had become the international spy, astronaut, warrior-poet, pirate you dreamed about becoming when you were 8 and then you will engage the massage chair and advanced performance settings in your rocket-ship of a car, lean back in the seat, smile and realize that life is way too short to do anything that doesn’t excite, inspire, and provide you with with a true sense of purpose.