Sometimes companies merge to end bitter rivalries. Sometimes they merge as strangers seeking purely financial returns.
But the mergers that have the best chance of enduring are those between companies – Storage Technology Corp. and Sun Microsystems, among them – that have known and worked with each other for a long time, merger experts say.
“If I was betting on a merger and knew nothing else, I would bet on one where there has been a relationship,” said Rick Maurer, a management consultant with Maurer & Associates in Arlington, Va.
After supplying equipment to each other for a decade, Santa Clara, Calif.-based Sun and Louisville-based StorageTek have announced they would take things a step further. Sun is paying $4.1 billion in cash for Storage Tek. StorageTek has sold disk-storage systems to Sun, while Sun has sold servers to StorageTek.
Montreal-based Molson and Golden-based Coors distributed each other’s beers in the U.S. and Canada for several years before merging earlier this year to become the world’s fifth-largest brewer, Molson Coors.
Having an existing business relationship simply eases things, observers say. But it doesn’t erase all woes.
“They’re still going to have all the pains of integrating their systems,” Adam Couture said of StorageTek and Sun. Couture is principal analyst for network and storage service at Gartner, based in Stamford, Conn.
“But from a product and customer-service point of view, some of the pain is mitigated by the fact they (Sun) were already selling and providing these products and services,” he said.
Compared with other industries, technology firms seem more open-minded about partnering before merging, said Su Hawk, president of the Colorado Software and Internet Association.
“Innovation breeds creative solutions, so technology companies don’t just think the only answer lies within their wall,” she said. “Sun and StorageTek are one of the larger examples, but they’re probably going to develop brand-new markets they can enter together.”
Jason Hutchinson, managing director and head of the technology investment banking group of Houlihan Lokey Howard & Zukin of San Francisco, said, “I think the partnership prior to acquisitions has proven to work well with many tech companies. It helps with integration, and that has proven to be one of the key and most overlooked ingredients for a successful merger.”
Even if you didn’t transact business previously, it helps to know your prospective partner well, one banker said.
About eight years ago, Denver’s Centura Health formed from the merger of crosstown rivals, the Adventist and Catholic hospital systems. It has been especially successful, said Wayne Nielsen of W.G. Nielsen & Co.
“You know culture, clients – and you probably have some instincts about financial success or financial challenges,” he said.
Nevertheless, a joint venture or strategic alliance doesn’t mean a merger is in the offing.
Denver’s Qwest Communications resells wireless services from Sprint Corp. of Shawnee Mission, Kan. But Qwest recently pursued a merger with MCI, a Sprint competitor. Verizon beat out Qwest by providing a a combination of cash and Verizon shares that MCI liked more.
News Corp.’s Rupert Murdoch and Liberty Media’s John Malone have worked together for years in TV programming and distribution deals. But when Malone got too cozy by buying News Corp.’s voting shares, News Corp. adopted an anti-takeover defense.
Apparently even good friends can get a little too close.
Staff writer Aldo Svaldi can be reached at 303-820-1410 or asvaldi@denverpost.com.
Staff writer Kimberly S. Johnson can be reached at 303-820-1088 or kjohnson@denverpost.com.
