Three years ago I merged the technology consulting company I had run for 15 years with another, competing firm. My decision to consider a merger grew out of a combination of business analysis and self-assessment. Looking at the numbers, I realized that the company had reached a plateau. Although profitable, it was not growing as quickly as I wanted it to. Looking at myself, I understood that I needed help in pushing the company to the next level.
Merging the companies was not easy. Even three years later there are still challenges in resolving culture issues and business plans. But, the time and effort spent on the merger paved the way to new successes. I exchanged self-reliance for codependence, quick decisions for long shareholder meetings and long hours for longer hours -- and I am delighted with the results.
CyTek Corporation has grown quickly since its inception three years ago. We have been fortunate to achieve that elusive synergy of management talents, business philosophy and employee effort to take the combined entity higher than the previous companies could have climbed. We have the momentum of an established business supercharged by the energy of a merger. But, a merger isn't just an event. It's a process. It's building a new company from existing pieces, and its foundation is the past.
What's Past Is Prologue
When I started my first company in 1982, I was 25 and looking for an opportunity. AdComp Data Systems was founded with a new IBM PC, an idea my father had to create CRM software for savings-and-loan institutions, my programming experience, and a $15,000 start-up loan from my grandfather. My mother and wife both worked at the company in the small office space we rented.
Although we had a great concept and a good product, changes in the economy and the business environment for savings-and-loans in the mid-1980s forced a change in direction for the company. AdComp began providing more custom programming and network system-integration services. Writing applications for several law firms led to a specialization in law-office technology. AdComp became recognized as one of the top resellers in the nation for various law-firm software packages.
As the owner of a small company, I did everything from sales to accounting at first. Hiring the right people was the first step in growing the business. We hired a first-rate support person and rewarded her efforts with stock in the company. Then we added technicians and salespeople. Many talented individuals moved through the office, helping us increase our client base and provide outstanding service. We took care of our clients and maintained a good profit margin.
However, recognizing that the Internet was going to radically change the nature and pace of the workplace made me realize I needed new energy and fresh ideas. Before, I had thought only of hiring and retaining individuals. Now I was thinking of "hiring" a whole company. Quick results from a team with a track record could take some of the risks out of the expansion plans I deemed necessary to excel in the new economy.
What Drives the Urge to Merge
The history of every small, entrepreneurial company is filled with hard work, personal sacrifice and determination. Acknowledging this investment and yet letting it go is a major hurdle for the owners in a merger. I didn't receive a call from someone offering to buy the company, and I didn't have a long-term business partnership that finally formalized into a merger. Simply, realizing that there was another way to grow helped me lose the "company as self" mentality that keeps so many entrepreneurs from working with others and enabled me to start looking for a possible partner.
My first step was to write down the three traits a firm had to possess to be a good merger candidate for my company: a similar business philosophy, outstanding technical talent, and an energetic entrepreneurial vision. There was no rush to merge, but we made it a priority. AdComp began doing more joint ventures and partnering with other companies on projects. We learned how other firms did business and how clients viewed their work.
All along, we knew we had plenty of research to do. There are many facets of "due diligence" when dealing with a small, entrepreneurial company merger. Examining both company and personal financials is critical. Looking at company cultures and staffs objectively to decide what changes will be made is essential. Determining owner responsibilities and duties so that the new company doesn't have duplication or confusion takes considerable negotiation.