Even in the best of circumstances, CEOs have a hard time holding on to their talented people. Skip Vaccarello kept his team together through three changes of corporate ownership
LOOK FOR THE K MART ON YOUR right. Then, just ahead on the left, is a Denny's. Turn there, and we're behind the parking lot."
Communications Solutions Inc. (CSI) has lived its whole young life in a squatty little building behind a San Jose, Calif., fastfood outlet. It embarrasses chief executive officer Skip Vaccarello, Harvard '71 and Boston University business school '77, to give directions.
On the other hand, squatty or not, a home to call its own has been a comfort to CSI these past few years. The company is with its fourth set of owners, three of them corporate parents. If employees couldn't know who would be buying them next, they at least knew where they'd be working. "Staying here helped reinforce the attitude that we were our own company," says technical sales support John Seal.
Remarkably, that seems to be true. CSI, despite what may be a record for a company of so tender an age -- four owners in eight years -- is close-knit and, management claims, profitable. Sales, which the company says have grown nearly 40% annually over the past five years, hit almost $10 million in 1986. CSI is a leading software supplier in its market, according to Dataquest Inc. director Linda O'Keeffe. "Their shining strength," she says, "has been the quality of their product."
Walk around the place and talk to people; you'll get no hint that CSI is some other company's subsidiary.
Other high-tech companies would surely love to have even twice CSI's employee turnover rate. Just 2 out of 24 software engineers, a notoriously fickle lot, have left voluntarily in the past four years, and one of those asked to return.
Four owners? The place ought to be full of neurotics, suspicious of anyone with a strange face and a three-piece suit. But it isn't, which suggests that Vaccarello and his chief lieutenant, engineering vice-president Gene Buechele, might know something about keeping a company whole while it's being shopped around.
They do. Their first lesson, though, came from the other side of an acquisition deal. They worked for CSI's first acquiror at the time of the acquisition.
Tiny CSI, with about a dozen people in all in 1983, was in two closely related businesses -- consulting and software. It had started life as a consultancy, helping large computer users and manufacturers of computers and peripherals learn how to get their machines to talk intelligibly to IBM mainframes. Eventually, CSI augmented its advice with a newsletter and seminars. That was the information section of the company.
Then, in 1982, CSI began writing software that would permit non-IBM computers to connect to IBM machines. That and other programs for large end-users made up the software section of the business.
In 1983, CSI's two technically oriented cofounders sold out to VisiCorp, the Icarus of the early personal computer software companies. VisiCorp had taken off with VisiCalc, the first popular spreadsheet program for PCs. Shortly after the CSI acquisition, but unrelated to it, VisiCorp began to stall out on delivering follow-up products. Within months of acquiring CSI, VisiCorp started a nosedive into bankruptcy. CSI, however, did not.
The misjudgment of each company by the other was amazing. When VisiCorp bought CSI, according to Buechele, it thought it was getting sophisticated software that it could sell along with other end-user products. For its part, CSI thought it was getting a distribution system and a capital source. Had both assumptions been true, CSI likely would have disappeared within VisiCorp.
But neither company had looked closely enough at the other. CSI's software hadn't progressed nearly to the idiot-proof stage it needed to reach for end-user distribution, says Buechele, and therefore was of little use to VisiCorp, even if VisiCorp had been ready to adopt it. VisiCorp, on the other hand, couldn't help CSI market to non-IBM computer makers, and, anyway, the acquiring company soon proved not to be the stable, cash-rich parent CSI thought it was getting. So, by and large, parent and subsidiary left one another alone -- except in one respect that aided CSI immensely.
CSI acquired its top executives and some of its best programmers from VisiCorp. First Vaccarello, and later Buechele, an early Intel Corp. alumnus, moved over permanently to relieve CSI's founders of corporate and engineering management duties. It's what the founders wanted, and it's the only part of the acquisition that worked as planned. Later, as VisiCorp crashed, other engineers joined the subsidiary.
As acquirors in this case, Vaccarello and Buechele learned from the experience that they have used subsequently as acquirees. The first, and less surprising, is: plan ahead; know what you want; know what you're getting. More on that in a minute.
The second, and less obvious, is: synergy and autonomy probably don't mix. A buzzword in acquisition talk, synergy is supposed to mean that the acquiree and acquiror together can do something that neither could do alone. In practical terms, Vaccarello and Buechele learned that synergy means the acquiror is interested mostly in the acquiree's product. Sooner or later, the acquired company runs the risk of becoming an in-house supplier to its new parent. Autonomy, on the other hand, comes only to companies that are bought and valued for their earnings, or earning potential, alone.
Only the fact that its end-user program wasn't ready to go to market kept CSI from being absorbed into VisiCorp as just another division. Buechele knew that, because it was the end-user program that he'd wanted when VisiCorp was buying CSI. So, during the next two acquisitions, when Vaccarello and Buechele were on the acquiree side of the deals, they knew precisely what they didn't want in a parent: synergy.
VisiCorp's growing need for cash and CSI's growing fear of failure by association soon suggested that a sale might be good for both companies. By this time, Vaccarello, at 39 the younger of the two, says he and Buechele had figured out what they did want in a parent: a substantial, financially stable company that was interested in CSI strictly as an investment. "We sat down," says Buechele, "and made a list of what the company wanted, what individuals wanted, and who the people were that we would and would not do business with. I had seen the founders fail to do that with VisiCorp, and it had given me an advantage because I knew exactly what I wanted from that deal."
