The right acquisitions
Mix all these ingredients together, and the financials started falling into place. In 1999, Chen’s first full year as CEO, the company turned its $93 million net loss in 1998 into a $62.5 million
profit, but growth does not stop with one good year.
With one solid year under his belt, Chen was ready for Sybase to become a market leader, and he began looking outside the company at what he could buy to aid the cause. Since early
2000, Sybase has successfully acquired and integrated more than nine companies, but leading up to Chen’s arrival, the company had made several acquisitions that brought more problems
than help into the organization.
“At the time, each of them looks rather interesting and probably strategically correct, but in hindsight, the ability to digest and integrate that was not there,” says Chen. “So a good thing
became a bad thing, and one thing led to another, so we started losing money, losing market share and losing people.”
Because of the previous acquisition problems, Chen wanted to ensure the company was not buying for the sake of buying, so he put purposeful procedures in place.
“We have a view of what the market looks like, and we try to have a view of what the market looks like for the next three years, and then we map that into our own capabilities, and then we decide
what the gaps are,” Chen says. “Once we decide where the gaps are, we let engineering have one crack at it filling the gaps.”
If the engineering team cannot devise it, then he seeks to acquire a company that has or that can. Chen says there are some areas that Sybase has no prayer of filling, in which case an
acquisition fills the void without letting the engineering team work on it first.
When looking at what to acquire, Chen has a disciplined approach and methodology. The company has to fit a certain financial profile in that it can lose money for the first 12 months but
must grow after that. This factor rules out companies that Sybase may overpay for and receive little return on.
Once a deal is made, Sybase retains the engineers and sales channel but lets legal, finance and human resource staff go. Then it focuses on maintaining engineering talent and intellectual property protection and facing any other challenges that arise. Chen says it’s easy to communicate his vision for Sybase with its newest members.
“We don’t let a lot of uncertainty hang around,” he says. “Since we only acquire companies based on strategic direction, it’s easy to explain to the acquired company and their employees
how they fit in to the vision. Since they’re already in the business, they can see it. As we got bigger and bigger, they said, ‘OK, Sybase does have a commitment, and they know what the plan
is, and yes, it’s a lot bigger than us.’
“This is why you can’t randomly acquire companies. … All the acquisitions are adding a piece to the puzzle, to our No. 1 in mobility.”