When Jeff Clarke left software maker CA last week to run Cendant’s travel businesses, the person who replaced him as chief operating officer brought with him a long resume of M&A activity. Michael J. Christenson was an investment banker for 23 years before he joined CA as vice-president of strategy and business development last year. Among other things, while at Citigroup Global Markets, he was a banker in Hewlett-Packard’s takeover of Compaq and AOL’s merger with Time-Warner. Since arriving at CA, he handled 12 acquisitions valued at a total of $1.7 billion. But Christenson says CA’s buying binge won’t last. “The days of the easy M&A are over. Now it’s much more challenging and complicated,” he says.
CA has quite the history of acquisitions. During the 1980s and 1990s, it beefed up on one takeover after another—often buying over-the-hill companies and products at bargain prices. The strategy was to create a huge portfolio of products that have staying power in corporations and then milk it for all it was worth. After the company got in hot water for accounting crimes in the early 2000s, the M&A came to a screeching halt and stayed dormant for two years while practically CA’s entire top management team was fired or quit. “During the transition to new management, they had built up quite a backlog. We spent the past 14 months working it off,” says Christenson. The new strategy was to buy smaller up-and-coming companies with technologies and products that could fill in gaps in CA’s portfolio and get it into new faster-growing markets. Its pickups included Niku, Concord, Netegrity, and Wily—all companies with bright prospects.
Now, there simply aren’t as many good small companies to be had. Christenson keeps a list of the 200 top prospects among venture-backed firms and small public companies in the enterprise software business. “We’re looking for tactical advantages for our portfolio,” says Christenson. “There are smaller businesses that are doing interesting things. We may go further upstream to get them. It’s all very immature.”
Christenson’s focus now is on making sure that the companies CA has bought in the past year or so are successfully integrated into the company—so they start to have impact on revenues. That’s a lesson he learned as a result of his involvement in the HP/Compaq and AOL/Time-Warner deals. “It’s all in the integration and the people. You have to get that right,” he says. “If you look at both of those examples, that’s were they didn’t fulfill their initial promise. You have to get the teams to work together well. The hard work in an acquisition starts when you begin to integrate. At CA, we want to be known as the best integrator in the technology business.”
CA is in an awkward position these days. It’s neither a software giant nor one of the nimble upstarts. How well it makes and integrates acquisitions may well determine whether it can become a vigorous and vital company once again.