For the past 16 years, Ipswitch, a $35 million software company with 190 employees based in Lexington, MA, has chosen to grow its business organically by expanding its global footprint, bringing new products to market and attracting workers primarily on the strength of its work/life balance initiatives. This combination of culture, work ethic and its well-received product lines has enabled the company to become one of the software industry’s top performers with a strong employee retention reputation. This was reflected in a Success Story Winning Workplaces wrote about Ipswitch a few years ago.

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More recently the company, with an eye on growth and penetrating new markets, embarked on a search for an organization with a like-minded culture with which it could meld. “More than anything, we knew we were going to base our search on three pillars: technology, financial and human due diligence,” says Gary Shottes, president of Ipswitch’s File Transfer division.

Shottes knew that to ensure a successful merger between Standard Networks (a file transfer software company located 1,000 miles away in Madison, WI) and Ipswitch’s File Transfer division, a primary consideration was the cohesion of these three pillars into the process. During the three month-merger process, completed in January of 2008, a great deal of attention was paid to smoothly integrating the entities.

“Acquiring Standard Networks was as much a structural change for the team at Ipswitch as it was for the 13-person team in Madison,” he says. “That’s why a lot of the work that is typically done after the acquisition was actually done before.” This involved an open approach aimed at doing three things:

  • Establish that Standard Networks’ technology was a good fit with Ipswitch’s product line;
  • Develop a communication plan that would provide a high comfort level to all employees; and
  • Guarantee that Ipswitch would retain all of Standard Network’s employees.

After initial conversations with the two founders of Standard Networks, Shottes along with Ipswitch CEO Roger Greene and VP of Product Management Kevin Gillis, spent several days in Madison meeting with each Standard Networks employee individually, in small groups and in a town hall meeting.

Ipswitch’s executive team talked to everyone about their careers, both from a short- and long-term perspective. The Ipswitch team alleviated fears that the company would uproot and move the Standard Networks group to Ipswitch’s headquarters in Massachusetts.

“We wanted to encourage open and frank discussions about the future and what the merger would mean to everyone,” Shottes says. “Nothing was off limits. We wanted everyone to know we were ready to make a firm commitment to the people.”

The Standard Networks Perspective

“When Ipswitch came along,” says Reid MacGuidwin, founder and former CEO of Standard Networks, “we were 13 people doing everything from marketing and R&D to sales and support. And we had a very open system of communication.”

Focused on the enterprise software market, Standard Networks fancied itself a David in an arena with Goliaths. And the company was winning the battle. In fact, the firm was actually trying to control its year-over-year growth for 2007 in order to maintain its “customer delight” model for support and to continue its strong customer-focused R&D approach.

“We knew it wasn’t feasible to slow our growth,” says MacGuidwin. “However, we had always been concerned that some of our talent would leave without a strong growth strategy, so having a company 10 times larger than us buy us gave our employees more career path opportunities than we could ever offer them as a small standalone company.”

During the merger, both companies achieved their growth targets, and after the January acquisition the combined group enjoyed double-digit growth and expects the next quarter to be on track, too.

In the start-up phase, Ipswitch File Transfer division spent time ensuring people were coming together as a team and that meant bringing everyone at Ipswitch – whether they were in Lexington, the Augusta, GA support center or the new Madison facility – together as one cohesive company.

“We wanted the team to be coequal members,” Shottes says. “Wwhen there is strong support from the top and people don’t feel threatened regarding their job or their opinion, the company can make significant progress as an organization. That has been our goal and today we’re achieving it.”

Lessons Learned

Just a few months after the merger was finalized, Shottes believes that the File Transfer division has a template for future growth. “The hallmark of our success is based on finding a small company with complementary technology that’s privately held,” he says. “On the back end we will focus on wrapping the new company into our brand, being mindful that culture – including the informal network of the acquired company – needs to fit into our system for a successful acquisition.”

Here are the key steps Ipswitch took that streamlined the process and will guide the company in any future mergers or acquisitions:

  • Match your values
  • Keep the lines of communication open
  • Get everyone at all levels of the company involved
  • Close the deal quickly
  • Win your new employees’ trust*
  • Keep growing

Mergers and acquisitions can be difficult – especially when the participants are thousands of miles apart. Yet in this case, thanks to the selection of the right partner, a well-executed plan, a willingness by everyone to make it work and open communication, Ipswitch File Transfer remained focused on business with a minimal disruption to its workforce.