I think it’s time to arrange a lunch meeting between Carly Fiorina and Serge Godin.
Why am I the first one to think of this? If anyone could help give the Hewlett-Packard chief executive some pointers on the difficult task of integrating acquired companies, it is surely the leader of Montreal-based integrator CGI.
This week will probably be remembered as a turning point in the twisted, angry saga of HP’s attempt to merge with Compaq Computer Corp. It was the week the Hewlett and Packard families turned their anti-merger campaign up a notch. Their efforts rattled Fiorina and her colleagues enough to stage a pre-emptive conference call to ward off further criticism. Not since Elizabeth Taylor wed construction worker Larry Fortensky has the public been so pessimistic about the prospects of a marriage, and this one hasn’t even made it to the altar.
While product overlap, poor PC sales and the sheer difficulty in executing such a transaction have been lobbed at HP and Compaq, the biggest stumbling block has been the perception of a culture clash. In fact, during the conference call this week HP exec Webb McKinney referred to the challenges Compaq employees could face in adjusting to what is internally called “The HP Way.” No one ever seems to be able to precisely articulate what this is, but the impression I get is that HP’s Way is perceived as patriarchal, stoic and slow to change.
But as Godin could tell you, there is more than one “Way” to build a company. CGI, which turned 25 this year, is run according to the “CGI Way,” Godin told me. These were not really spelled out either, but they sounded more like a set of best practices that the firm’s 435 vice-presidents follow in their day-to-day operations. It could be that these so-called Ways are just psychobabble which are used to foster a sense of cohesion in organizations where the corporate culture is hard to assess. There is something off-putting about it, though — it implies that it is either the HP Way, the CGI Way, or the highway.
Whatever CGI’s Way is, it works. This February the company completed the biggest acquisition of its history, the $670 million buyout of IMRGlobal. While it is much smaller in comparison to the HP/Compaq deal (and doesn’t involve any meddling relatives) it was one of the major milestones in CGI’s quarter-century history, and it went off without any noticeable problems. Besides increasing its presence in the United States, the United Kingdom, France, India, Japan and Australia, it also gave CGI some additional expertise health care and financial services, two of its key verticals. No wonder that it has since signed up or renewed service agreements with the likes of Laurentian Bank and the government of Quebec.
The similarity with HP/Compaq is that the acquisitions are at least partly about size. CGI is now the fourth-largest integrator in North America, which will give them an extra boost when enterprises tender outsourcing contracts. HP, meanwhile, wants the services clout to take on IBM, even if that means specializing in support. Consolidation in CGI is driven by growth opportunity, while most people seem to think the HP deal is being driven by constricted market conditions.
In the wake of its successful merger CGI last week secured another $125 million from a syndicate of investors including CIBC World Markets and TD Securities. The money will pare down debt, Godin said, but will also be used for further acquisitions. Now that the U.S. has been effectively covered through IMRGlobal, expect to see CGI turn its attention to Europe.
Since Fiorina made the big announcement on Sept. 4 there have been lots of people digging up horror stories of mergers gone awry, including Compaq’s own merger with Digital Equipment Corp. in 1998. As the future of the HP/Compaq deal faces its toughest scrutiny yet, maybe it’s time for the two partners to take a closer look at a company that seems to know how to pull it off properly. Carly, Serge, allow me to make the reservation.
sschick@plesman.com