Transcript Selling Sourcing A Strategic Perspective

Selling The Sourcing
Business
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Why Did We Buy It?
• Acquired ABC in March 2000
• Strategic Rationale
– Foothold into enterprise software apps
– Key strategic customers (e.g. WalMart, Macys, GAP, Dillards,
Timberland, etc)
– Believed sourcing was an attractive growth opportunity
– Got an instant development & PSO organization
• Purchase Parameters
– Number of Enterprise Customers: ~30
– Purchase Price: $100M+
– Financing Terms: 5% cash; 95% stock at over $100 per share
Deal Done During The Go-go Days of The Tech Bubble!
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What Happened After We Bought It?
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Discovered software was poorly constructed
– No APIs, No web interface, etc
– Poor due diligence prior to purchase
Market opportunity was smaller than expected
– Application features/functions addressed a narrow market
– Longer than expected sales cycles
– High tech spending bust during the past 3 years
Poor post merger integration
– Some of the key people left relatively quickly (Mary Jane, etc)
– Cultural conflicts and missteps as XYZ tried to transition to an
enterprise software driven business model
Financial incentives evaporated
– XYZ stock price plummeted in tech spending dive
– ABC shareholders couldn’t sell because they were in a lockout period
Operating performance issues
– ABC sold 30 licenses prior to the acquisition and we have only sold 4
since then
– XYZ inherited a lot of customer complaints and anger about the
software performance
Classic Post Merger Deal Execution Problems Followed!
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