EMC’s Acquisition Strategy: New Insights from Data Domain (and Rumored Isilon Deal)
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but examining them more thoroughly—basically, being very selective about potential deals.
—Execution discipline. It’s important to tackle the business objectives of any merger with “a real sense of focus,” he says. This has to do with the integration of the merged company, and making sure to follow through on why the acquisition was made in the first place.
—Talent retention. Holding on to key leaders, who usually exit a merged company as soon as they can, is an art. Olton gave as examples of those who stayed at EMC, at least for a significant amount of time: Frank Slootman from Data Domain, Art Coviello from RSA, and Diane Greene from VMware. (Xconomy has a current story about Greene here.)
—A strong sense of accountability. This seems obvious, but there needs to be a clear set of metrics to evaluate the performance of any merger. (An obvious one is the revenue growth of the acquired business units.)
None of this sounded particularly unusual to me, so I asked Olton how EMC’s acquisition (and company integration) approach really differs from that of IBM or other big tech companies. Not surprisingly, Olton described EMC’s approach as “more successful” than the others. Its key differentiator, he says, is its “ability to adopt a very flexible model of integration that fits the context for any particular transaction.” That means knowing when to leave a company as independent as possible, and when to integrate it fully.
A recent example would be Data Domain, acquired by EMC for $2.1 billion in cash in July 2009. Because of the circumstances around the deal—EMC took the deal away from its competitor NetApp—the “first meeting with the company came after we executed an acquisition agreement,” Olton says. “We didn’t know what to expect, but it became very clear they were a company based on the same cultural attributes that had made EMC successful.” In other words, there was a good cultural fit of accountability, and Data Domain had what EMC considered to be great operational discipline, a strong track record, and investments consistent with forecasts, Olton says. That, and a great sales force—which EMC did not want to disrupt.
“The objective is not to lose business momentum, and to accelerate everything that’s good about the business,” he says. “And figure out how to put Data Domain’s products into our very … Next Page »