A Deal with The Devil: Gartner Refuses to be Sold Down the River Part II

This is part two of a 2-part series. Click here to read Part I.

When it was their turn to present, the CEO went through a somewhat plastic presentation, a standard sounding pitch which was undoubtedly used to charge up the people in his numerous offices around the world, and possibly to impress clients as well. There was little value-add, and when he got to the benefits to Gartner which a combination with his firm would produce, every thought appeared hollow. For example, he would help expand our flow of information which in turn would increase our success in the marketplace with faster resulting growth. It took no time for our senior executives who were attending to challenge him.

David Familiant who ran our international operations began with two questions: First, “why would we, if presented with an alternative to re-acquire our company or work for any larger firm, choose the latter?”  Familiant himself had joined just six months before the Saatchi deal with certain aspirations which had been  disappointed by the Saatchi acquisition, but which could now theoretically be realized. The second question had to do with the visiting CEO’s posturing about the true quality of his company and his people, when we specifically thought we knew otherwise. Familiant was direct, and told him that our own international staff was populated with several people who had worked with his firm and had no use for it. The CEO responded with what seemed to be another non-sequiter, that certain business units are under pressure from time to time and are down-sized, implying that the people we hired were from down-sized units. But it did not happen this way; their people now appearing on our payroll almost all left the CEO’s firm voluntarily and had quite variable reactions to their prior employer. The CEO later told me that one of the people, a senior European who we ourselves subsequently released, had demonstrated questionable practices.

Familiant then said, “You fellows really have chutzpah. You know what the definition of chutzpah is?  It’s the guy who craps on your door sill, then rings the bell and asks you for the toilet paper.”  He said this humorously and I hoped that we were not being dragged down to basement level, although frankly we had previously considered doing just that, for example posting copies of the their bad-mouths on our wall, for they themselves to see. Grigs Markham our CFO then editorialized how speaking only for himself he would never consider working for this firm; this elicited the response that we misunderstood the ethics of his company. Bruce Rogow, our research head and ‘culture expert’ then addressed both these issues and how the two companies could never fit well. He also pointed out that if the proposed transaction would take place, all of our professional employees would leave (poetic exaggeration) and this CEO would be able to report back to his board that he had eliminated a potential competitor (welcome humor!). In fact everyone laughed, although at this point the potential buyer’s level of discomfort must have been excruciatingly high. We were telling them in no uncertain terms that they were unwanted…and so the meeting went.

A Deal with the Devil

At the conclusion of the formal meeting the CEO asked to speak with me alone. I replied that I could not do that without the approval of Blackstone, in fact afterward I was sorry I spent time alone with him even with Saatchi approval.  We walked into my office:

“How can we make this happen?” the CEO asked confidently, seemingly oblivious to the message which he had received all morning. I then pointed out that he had to decide if he wanted to bid, and then deal with Blackstone. I could not get involved in the process.

“How many bidders are there?” he searched. 
 I answered “Please ask Blackstone.”

“Can’t you give me some indication? If there are other bidders, we will feel forced to bid for your company.”

“Perhaps Blackstone will tell you” I hedged.

“Since you are working on your MBO (Bill Pate had disclosed that openly at our meeting) what is the price level which you are planning to reach?”
 I responded “You know I can’t get into that. I’m not at liberty to say anything about price or the bidding process.”

“If I thought there weren’t any other bidders, then I would not bid against management.  But if I thought there were other bidders I would feel compelled to bid against management.”

“You have to make your own judgment as to whether making a bid is prudent; you must deal with Blackstone on that.”

“Can’t you give me some idea as to who else might be bidding?”

He didn’t let up, apparently hoping that I would eventually slip and provide information. He asked me how busy I had been in recent weeks on issues other than running the business. I told him we were busy putting together our own bid.  He also asked how busy was I with other people walking through our doors?  I refused to answer that one, playing it even more straight than Blackstone could have hoped for. 

He then asked whether if he worked with us to help buy the company back ourselves, we’d have an approach which would interest us? I told him that in putting together our MBO we were considering both a financial transaction and a strategic investment by a corporate firm. He asked questions about the latter structure and I refused to respond. He asked if he could discuss with us being that corporate partner?  I said it was possible that we would discuss that, but only after it was firmly established that he did not want to bid independently, and I explicitly repeated again that Blackstone viewed him as being an outside bidder not involved with management. After all, anything  I would say which would draw him into a discussion with management would be inappropriate and I could not discuss that with him until he completed his due diligence and determined independently whether to bid for the company or not. 

Yet he still did not give up, asking that if he didn’t bid and could visit with us, what were the chances were that we would deal with him?  

I replied: “that would come down to a group of us sitting around a table, looking at what you had to offer versus what other people had to offer. I must indicate based on this morning’s proceedings, the chances of our voluntarily wanting to work with your firm would be slim.  The deal would have to be much better than others which were on the table”.

The whole process was intensely depressing. We felt the seeming insensitivity whether it was purposeful or not, but the CEO’s  posturing was as though it made no difference: we had a franchise which he would bless with a “reward mechanism” based on performance, which would keep most of our people in place, if not happy. If this were true (I thought it could conceivably be), my heart would nevertheless sink. Dealing with what our people perceived to be a classless bunch would be no fun at all and I felt it would mark the end of Gartner Group as a quality institution.

Most cynically and perhaps ridiculously, it crossed my mind that Saatchi and this company might be conniving to make a deal happen for some narrowly focused objectives which were being kept from us. Except that as Saatchi was pushing for unreasonably high profits from us, it might ask and actually obtain a high price, while if the CEO actually succeeded in acquiring us he might well end up with an empty shell!

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