Acquisitions: cull the managers

When a company acquires another one, not just in EDA, there is often an internal group already doing something similar. For example, Intuit has just acquired mint.com and they already have a product, Quicken Online that competes in pretty much the same space. So how to merge the companies and the products?

Be ruthless and cull all the director-level management of the existing product (Quicken Online in this case). Put the managers of the acquired product in charge.

This is one thing that I learned at Cadence (you might have noticed that Cadence has done a fair number of acquisitions over the years, to say the least). The first thing to do is to lay off all the managers responsible for the internal competing product. They will inevitably try and sabotage the acquisition in more or less devious ways, worry too much about users of the existing product and so on. The junior worker-bee programmers or designers can be reassigned; they are much less emotionally invested in the failed internal product and have the knowledge to merge any parts of the old product that make sense.

In the Quicken case they seem to be doing something different, based on what they have said anyway. The correct thing to do, in my opinion, is to put the mint.com guys in charge of everything. Not just their own product but also the Quicken Online product. And the managers of Quicken Online need to go. They probably weren’t in favor of the acquisition and will subtly try and show that it was a mistake and try and ensure as much as possible of their own work survives going forward. But it is the mint.com product where as much as possible must survive going forward, and the best way to ensure that is to put those guys in charge.

Steve Jobs did just this when he returned to Apple along with the operating system from Next (internally Mac code is still littered with classes that start NS for NextStep). He put the Next software managers in charge and pushed out the managers who had been responsible for the failed strategy that Apple had been pursuing. The Next managers could implement their strategy much more easily if they didn’t have another set of managers arguing with them about every decision.

Everybody knows that the big time sink in mergers is where products overlap. But the best way to handle this is to make sure that the managers of the successful, acquired, product are in charge of those decisions and not the managers of the failed product. This doesn’t make the problem go away completely, after all the customers of the existing product cannot typically simply be upgraded painlessly to the new product, but at least it means that the winning product will be the acquired one, which is essentially the decision that senior management had already determined is what they wanted to have happen when they decided to do the acquisition.

Not all mergers are like this, of course. Sometimes the new product line is completely complementary with no overlap. But often, under the hood, there is more overlap than is obvious. When Cadence acquired Ambit, they were already ahead of the curve because their internal synthesis product, Synergy, was doing so badly that they had killed it off six months before they acquired us. But one reason for acquiring Ambit was for its timing engine, which seemed to be the best in existence at that time, but the existing timing team at Cadence still controlled timing strategy. It took months to arrive at the foregone conclusion that the Ambit timing engine should “win” and become the Cadence timing engine, a decision that would have taken 5 minutes if Ambit’s timing team had been put in charge on day 1.

It is very difficult to keep innovation going after an acquisition, especially if it is done at a high price so that many individuals have made significant money and are really hanging around largely to vest the rest of their stock. Keeping a competing team around, and one that already is better connected politically, almost guarantees that innovation will stop and that the acquisition will be much less successful than it could have been.

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