Podcast

SolarWinds TechPod: Tech Talks — How to Survive an M&A — Episode 014


In this episode of SolarWinds TechPod, Tech Talks, host Alex Navarro discusses how to survive and thrive before, during, and after an acquisition with the organizer in chief of Gestalt IT’s Tech Field Day, Stephen Foskett and SolarWinds Head Geek, Patrick Hubbard.

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Episode Transcript

Coming to you from SolarWinds HQ in Austin, Texas. I’m Alex Navarro with SolarWinds TechPod. This is Tech Talks.

This episode of SolarWinds TechPod is brought to you by Orange Matter. Find it at orangematter.solarwinds.com.

Alex: For anyone who’s worked for an organization that’s been acquired, it can be a disruptive and sometimes even traumatic event. Mergers and acquisitions impact all involved, from the top to the bottom. The good news is, there are steps you can take to survive and thrive. My guests today know a little something about this topic.

Patrick: “I have been…over the years.”

Stephen: “Be ready to prove your worth.”

Alex: My first guest has 25 years of experience in the IT industry, has been a long-time voice in the storage industry, and is currently the organizer in chief of Gestalt IT’s Tech Field Day. Welcome Stephen Foskett.

Stephen: Hello. It’s good to be here.

Alex: Good to have you, Stephen. And Patrick Hubbard has 20-plus years of software company experience and also happens to be one of our beloved Head Geeks here at SolarWinds.

Patrick: Well, hey Alex, thanks for having me.

Alex: Absolutely. So back in the day, did you experience your fair share of M&As?

Stephen: Absolutely. One of my favorite fun stories is showing up at a company and on the first day when I’m signing the paperwork to get hired, I said, “Hey, how come it says, how come it says Sprint here? I thought I was getting hired by Paranet.” And they’re like, yeah, we got acquired today.

Alex: Surprise.

Stephen: Yeah. And, yeah. And I was in involved in some larger acquisitions as well, back in the day. And you know, sometimes it goes well and sometimes it doesn’t.

Alex: And you survived either way.

Stephen: Yeah. Well, not life or death, you know, it’s just work.

Alex: It’s just my livelihood.

Stephen: Just my livelihood, just my mortgage payment, bank will understand.

Alex: Well, Patrick’s a survivor as well.

Patrick: Yeah. Well for me, I mean I’ve, I’ve, I started as a developer, so I’ve always been really close on the software side and software companies, uh, are, are, are born and die on a pretty regular basis, especially startups. And so, they sometimes will be positioned to be part of a, an acquisition play or sometimes they, you, they always had the dream of IPO only that happens for very few of them. And so, I have been acquired into and merged into companies over the years.

Alex: I feel like with anything else in hindsight, there’s always red flags. There’s always signs, right, that you could have seen. So, from your personal experience, either of you, what are some signs that you wish you had looked for or recognized and what would you recommend for people to look for now?

Stephen: So, I was in IT. So, unlike Patrick who was actually, you know, doing useful things, you know? No, I was just keeping the, keeping the lights on. And as an, as an IT person in a company that’s been acquired, you know, I saw some definite red flags. When the acquiring company literally got rid of all of it, IT management and said, these are your new bosses, these are the people you work for now, congratulations. And I mean, basically just steamrolled everything that we had been doing for the entire time, you know, at the previous company. That’s a challenge. And, I think that that’s probably the first thing that I would look for, if you are being acquired is, are you allowed to continue what you’ve done or is this going to be just a massive disruption? Whether it’s in terms of people or processes or applications or software or whatever. That’s, that’s huge. Have you, have you seen that sort of thing?

Patrick: So yeah, I started as a developer, so I’ve always worked for software companies and some of them have been fairly large and some of them have been small startups where you hope to have some great upside and nine times out of 10, they kind of fly into the ground. And so, yeah, I’ve been acquired into several companies and then more recently been part of, you know, companies that have acquired other companies and sometimes they go really, really well and sometimes they don’t go so well. It’s, it’s always interesting to see, the evolution of, of folks that are a part of, of companies and how it, how different teams react to that. Right? So, you’ve kind of got the executive leadership of that company that that goes one way. And then they’ve got a business driven set of ideas about what that company is and then you have everyone else that’s, you know, a little bit more like me on the product side, either product managers or developers or certainly the support folks that spend a lot of time working with customers. And so, for them, that experience is a lot different depending on how those products are going to be positioned after the acquisition.

Patrick: I was with a, an identity management software company that was acquired into Sun Microsystems a while back. And Sun was an interesting experience in that, it was actually pretty good as far as a large acquiring company buying someone else, especially one that’s a hardware company, right? Because that’s that first thing is if you’re going into a hardware company, the chances of you being able to be focused on delivering features for a broad set of customers really goes down. Right. Cause the main thing that they’re going to want to do is make sure they’re supporting their own stacks and their own set of technologies that are a part of their vendor networks and, and other, business relationships. And so the thing to watch is what happens with the engineering team and especially like some of the attached teams, not so much the POs, but like user experience, some of the teams that are focused on customer experience in particular and feedback, because as a part of the acquisition, they stop listening to customers or even not even stop listening, but just sort of roll the tech, the tech up underneath the brand with the expectation that it’s interchangeable or that anybody can work on it, that’s usually a sign that it’s just a technology play. And, it’s not a customer acquisition because it’s not so much, to Stephen’s point about keeping the people, sort of the, the brain trust of the company isn’t important. It’s just the IP. So, that’s always a terrible sign when they let go of most of the people that really understand the product.

Alex: Yes. And so switching gears here slightly, what about from a director level perspective?

Patrick: You mean like if you’re the director in a company, you’ve been using a product for years, and all of a sudden now that product just got bought by someone else?

Alex: Yeah.

Patrick: That’s kind of tricky, right? Because you were in a position, especially if you’re, maybe not so much part of the purchasing team where you’re worried about price, but where you are part of the final selection process. You know, the CIO, the CIO, the CTO relies on you to choose products that are going to work well in the company and not cause a lot of grief. Yeah. What you see someone got acquired, especially some, a product that you’ve been using for years and everyone seems happy with that. That can be a pretty scary time. I like to LinkedIn-stalk. So, when I see a company get acquired, I will go out and find people that I’ve worked with before, like especially, maybe part of the support organization or, not so much sales reps because once, once you’ve interacted with the sales team, the relationship that you have with at that company and the way that that product works for you really ends up being with you in the support organization or maybe the maintenance renewals team or someone else. But, I’ll go add, people with email addresses that I can find from that company, in, in my mailbox and, and start watching them. And if you see a bunch of them disappear in mass, yeah, that’s, that’s a sign that you need to start thinking about the possibility that that product may not be getting a lot of investment in the future.

Alex: A mass exodus is usually not a good sign.

Stephen: There’s definitely a lot of fear and concern, you know, I remember when I was a systems administrator, we were using the CLARiiONs and AViiONs, and then Data General got acquired by EMC and we were all like, oh my gosh, what’s going to happen here? Turned out that was a tremendously wonderful move. EMC did great things with that product. I’m dating myself now, cause that was what, 25 years ago. But still, it was long time ago, but it, but it worked out really well.

Alex: Spoiler alert.

Stephen: Spoiler alert, that’s what happens in season three. It was great, but there’s always that fear that what if they’re not going to support this correctly, what if they’re not going to continue development? You know, I mean, what if it’s suddenly a dead end? What if they bought it and didn’t want it? I mean, that was the problem with the AViiON system. I mean, they didn’t want it and they basically just killed it. You know, what happens next, is, it’s natural to think about that and yeah, you can look at their LinkedIn and you can see who’s leaving. Your sales team is probably going to leave, but what about the support people? What about the developers? You know, do they have a roadmap going forward and you know, you’ll, you’ll, you’ll see where, where it’s going. The challenge really is, like Patrick said, I mean, you bought that software for a reason or hardware or whatever. Then what?

Patrick: You really want it to work out, right? We all have these experiences that, or at least maybe you read about them in the news, where there are these unicorn stories, you know, like you’ll look at VMware’s acquisition of Nicira, right? So that became the foundation of what is now NSX. And in a keynote a couple of years ago, they more or less said that the, the opportunity with NSX is even bigger than it was for ESX. So, if you were a nice Nicira customer, chances are you got a ton of free VMware licensing and the rest of it to help you migrate to the combined solution. And that worked out great for you. If you’re a Meraki customer, I’m pretty sure they’re happy after the Cisco acquisition. That one was so big that in a lot of ways it, it actually, the sort of brand identity of Meraki sort of actually lifted Cisco and you see some excitement especially on the wireless side there and they’ve left them to be autonomous. So, it kind of breaks down for me. Like if you watch a, a company, if a tool that you’re using is acquired into a company and that company has nothing to offer in that, in that area and they are literally filling a void in their product line and then they integrate it in that, that can actually work out really, really well. But it’s those ones, Stephen, like you just mentioned, where maybe they’re buying the second or third version of a thing or worse, they are possibly taking a competitor out. That’s the one where you really have to start to be nervous and almost just take a minute to maybe even grieve a little bit. That’s something that you’ve been using for a really long time, something awful might happen to it, and then start considering the possibility, not immediately, that you’re going to have to change tomorrow, but at least in that moment, start thinking about the possibility that you may have to change and start planning for that.

Alex: Well, that’s the first step, right? Admitting that there’s risk,

Patrick: Admitting that there’s risk, buying some insurance against that risk. I mean, what do, what do we do in IT? We’re, we’re risk averse. That’s the whole point of IT. Don’t break and run as cheap as you can, right? So, if you have tools, especially when you’re talking about, you know, foundation, technologies, things like, you know, if we’re talking about monitoring for example, that’s one of those things that is a critical aspect of keeping the lights on, so if, if you are feeling like you’re not going to—what you’re making a face, what?

Alex: This is a podcast. Don’t talk about my face.

Stephen: I was just making a goofy face cause you said monitoring and I’m like, oh here we go.

Patrick: All right. So, I won’t say that.

Alex: And then, I was reacting to his face and then you called out my face.

Stephen: No, you can say monitoring. It’s okay. I’ll just make a face.

Alex: You can say monitoring, this is a safe space.

Patrick: Is it?

Alex: Kind of. It seemed like maybe Stephen had something to add to this.

Stephen: I’m not allowed to speak.

Patrick: He does have something to add to it. Was there a place where I stopped talking? Somewhere in that Meraki NSX worked out great.

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Stephen: So one of the things that Patrick just mentioned was that, that idea of like why did they make this acquisition and you know, what does it mean to the new company? And, I think that if you look at it from that perspective, and this is a strategic acquisition for the acquiring company, absolutely. This can work out really well. Like the Meraki example, that could have looked bad from a customer perspective because of course Cisco already had a lot of, you know, wireless gear. They promised customers that it was going to work out and that they were going to keep it alive and they’ve done exactly that, and it’s worked out extremely well for those customers. I mean, we’re a Meraki customer and we love it. You never really can tell. I think that, you know, you have to kind of as the, the customer, you’d have to look at it and decide, you know, how much do I believe in these people? How much do I think this is going to work out? Sometimes it’s obvious, sometimes it’s less obvious, but, you know, overall, you know, you want to make sure that you’re protected, but at the same time you don’t want to be making decisions based on, you know, customer acquisitions and Wall Street money kind of stuff. You want to make decisions based on quality of the product and that’s, you know, another, another thing to think about, you know, is this what I want to use in my environment? Is this something that’s going to have a long lasting, you know, place and is there, you know, is this going to match my needs and also do I think that it’s going to get wiped out and a couple of months?

Patrick: Yeah, I like to kind of turn the help desk system into a metric source, or at least start tracking my help desk tickets with a vendor that I’m using. Right? I mean they have a lot of instrumentation obviously on their side, but you are opening and closing tickets on a pretty regular basis, especially if you have a, a fairly large implementation using a tool and you can start measuring things like how long does it take to close a ticket? How many interactions do I have to have? What was the relative quality of the experience of that call? So, I mean you can throw that into an Excel spreadsheet and track it over time and actually start to get some empirical evidence about the quality of support for that, that product. Because I think the thing we don’t like to admit is that a lot of times in these acquisitions, they are strictly driven for a business reason, right? And, especially for products that are really complicated, that have a lot of professional services that are really bespoke for extremely large companies, where if you are one of, if you’re one of a handful of companies that, that, that, that vendor relies on for multimillion dollar a year renewals, chances are it’s going to be fine for you because you’re effectively a 1% or right in terms of what it means to that company. But if they bought that company to continue to provide service for their top 10 customers and you are not one of them, they’re almost happy to let you wander off because it decreases the cost of delivering service across their whole customer base by narrowing it down to the small number where there’s someone going onsite and doing upgrades and installs and creating new opportunity for professional services. If you’re not one of those, it may not, may not be so smooth.

Alex: Admitting that there’s a risk and, you know, in other aspects of our life, we have insurance policies to back up for worst case scenarios. And I feel like this is the time where it would be good for us to take a look internally and think I need to give myself a timeline. When does this data need to be ported over? What is my game plan? So that way, if things don’t work out, if you’re not a unicorn story, you’re prepared, if nothing else.

Patrick: That’s a great point. What do we, what do we like less than anything else in IT? That would be interruption, right? The, the number one problem and the reason that we don’t get proactive is we’re constantly being interrupted and having to replace a fundamental tool that you rely on every day is about as big an interruption is there can be. So yeah, definitely getting a grip on it and, and setting a date. Even if your turns out you don’t have to move, but at least setting a timeline for when you would, allows you to move that date, into a schedule based on, you know, a time of your choosing so that you can make sure that it’s not going to overlap with something else. It’s not a huge surprise and also gives you time to start doing some education, to maybe sign a, someone on your team to start looking at other options, to start having conversations with your leadership to say, hey, I know you weren’t expecting to have to replace this product. But yeah, something may be happening there. We’re not sure yet. But it gives you a chance to demonstrate that you’re being proactive because if you have to replace it may be pretty involved. There may be additional costs. You may need some new budget to make that, to make that change. And certainly, you’re going to take time away from the rest of the team to do it. So not surprising your leadership with that is also a fantastic idea.

Alex: How to best cover your assets, right, is to go and learn about other products. Because what you’re using, just because it’s legacy, just because you’re comfortable with it, doesn’t necessarily mean that that’s what you should continue to be using.

Stephen: Yeah. Let me give you a real specific example of something. When this happened recently, the web hosting provider for Gestalt IT and Tech Field Day was purchased and, you know, it was exactly what Patrick is describing. So, you know, the news came out that this has been purchased, you know, and it, and it was, you know, going from a real managed to a real unmanaged provider and that was a big red flag because it looked like it probably wasn’t a strategic acquisition for them. And so, as the customer, what we did was we looked at it and that way and we said like, you know, like how long is this going to run? You know, the, the, you know, it’s going to close, you know, in three months. And then, they’re going to probably give us an, at least another three months to look at it before they decide to like, do anything radical. And so, we internally, exactly what Patrick said, you know, we looked at it, we looked at our data, you know, got a handle on what we were doing with this vendor, you know, we immediately started figuring out, how can we pull our data out of this and move it somewhere else? If that’s something that we want to do without really like, just panicking and without saying, oh my gosh, what’s going to happen here? We tried experiments, you know, we set up a test environment and got things up and running on another environment to see what would happen. You know, we looked at some of the other tools out there to see if there was a better way to do what we were doing. And ultimately, what we did was we found a tool that we liked better than the one that we had been using before. So, we decided, you know, we’re going to, you know, have a timeframe here and, and, and three months from now we’re going to decide what we’re going to do to move forward. And at that point, it was actually great timing because that’s when the acquisition closed, and they announced that they were shutting everything down in another six months. We were just fine with that though. So, we had a plan, we did it in stages, we did tests and we migrated things over. And by the time the, the actual, the thing that would have been a big red alert, shutting down the, the, the product that we were using, by the time that happened, we weren’t even using it anymore. We were done. We were fine. Everything was fine. So, you have to, you have to look at it like that. And frankly, we’re happier with what we have now than what we had then. And it was an opportunity for us to reevaluate what we were doing and whether it met our needs and whether there was a better system, a better architecture to meet our needs. And we ultimately decided there was.

Patrick: Yeah. That’s sort of the silver lining of this, right? Because you’ll never invest a lot in reevaluating all of the tools that you have. You simply can’t do that, right? You’re using them. You don’t want to have to second-guess him all the time, but a lot of times, any time there’s an acquisition of a company that you are rely on for any portion of IT, it does give you a chance to, to go through that evaluation, as Stephen was just describing, you very likely may end up with a change that you would have made or maybe had been thinking about making for some time, and so that ends up not being lost effort, that ends up actually improving the quality of the service that you deliver over time. And so yeah, it’s a forcing function and it’s inconvenient, but it a lot of times can work out really well for you for ya.

Alex: I’m curious, what would be your advice to our listeners in terms of ensuring your longevity, whether that mean from just a straight employee perspective, whether that mean because you are a manager of a particular product or whether you’re at the director level of an organization that’s just been acquired?

Stephen: Let me take that in reverse order. So as somebody who’s been acquired, a few times in my life, unfortunately, one of the first things you need to do is you need to be a little bit political about it and you need to look at the new organization and see how you fit in and basically be ready to prove your worth, you know, show them what you’re doing, show them how valuable you are and frankly show them that you’ve got ideas that are not necessarily what’s always been done there. You know, be ready to, to jump in and, and, and support the new organization. Because, you know, the thing is, no matter how much you might have loved your old company and your old, you know, management structure and your old IT systems and how everything used to be, things are gonna change. And you can either, you know, get busy getting out of there or you can get busy making it happen for the new company. And, those are basically your choices. Unfortunately, sticking with what worked, even though the new company doesn’t want it, not going to be such a good plan.

Alex: Probably not going to end well for you.

Patrick: The first one is let’s say you, you’ve been a part of that company that just got acquired. You’re fully vested, you have done everything that you intended to do, then go ahead and go onto your next challenge and have a great time of it. No, but seriously, I, I, the way I’ve always approached it, especially cause I’ve been kind of on the product management side and customer advocacy side, is I find that if I start thinking like a customer of that, of that product, not the new company but a customer of the product that used to be my company before it just became part of a product in another, in another line is really helpful because if you take that same level of, wow, I still love this product but I’m a little skeptical about what may happen in the future, you will start making decisions based on the feedback from the users of that product and since they are ultimately going to determine the success of that product after the acquisition, if you see them, if you are on the phone, if you are collaborating with them, if you are spending a lot of time working with them, they will tell you whether or not that that is going to work out at a meta level and then you can decide how you’re going to fit into that, but below that, because if, if that acquisition is not going to go well, that’s all you need to know. Then, why would you want to stay unless there were some fantastic opportunity to lateral over into something else in that new org. But if you’re, if you’re software and you get hired into a hardware company, that’s usually not the way that works.

Alex: It’s also something that’s out of your control. So, what’s the point of worrying and fretting about something that you literally have no control over?

Stephen: And as we just said, you know, the, the other part of that question is what happens on the other end of that? If you are the customer and you see something, an acquisition happening, and I do think that, that as soon as that happens, as soon as your favorite tool or whatever has been acquired, you know, you do need to reevaluate you need to look at your options. You need to get a handle on your data. You have some work to do. And even if things go well, you know, that’s still an opportunity to reevaluate what you’re using and consider alternatives. But, you know, don’t be too negative on it. I mean, that’s the other thing. I mean there’s a lot of fear, fear of the unknown. And a lot of the time the unknown is just like this except different, you know, I mean it’s not that big of a problem. And so sometimes, you know, you can get carried away with that fear, but you really shouldn’t, you know, it’s, it’s an opportunity. You need to protect yourself. You need to reevaluate. But it’s not the end of the world. It’s just a change.

Patrick: I think at the end of the day, is just to remember that it’s only technology and that in your career you are going to have, be working with many, many different technologies. Is there, like when you’re, when you’re a developer and you’re first starting out and you find some language that you really like, you say, “Oh, I’m just never going to code in anything else. This is, this is just it.” Well, after you’ve been in it for a while, you’ve been through several different versions of storage, technology and vendors, applications, network gear, the technologies underneath any one particular brand change all of the time. So, when you’ve had one of these moments where you see an acquisition, especially one that just doesn’t seem to make sense, step one is just breathe, right? It’s not the end of the world. No matter how great that tool has been or how friendly their team has been. If it’s not going to work out, you’re going to be able to get signals from it. And just staying ahead of that, you can mitigate, you know, major consequences from that change and you’re going to be okay.

Alex: Well, thank you both so much for stopping by and visiting with me.

Patrick: It’s always great to chat.

Stephen: Absolutely. It’s good to see you.

Alex: And thank you for listening. I’m Alex Navarro and we’ll catch you on the next episode of SolarWinds TechPod, Tech Talks.

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