Class Wars

There are a lot of rumors floating out there suggesting why the merger imploded. Interestingly, many are pointing the finger at EquaTerra– alleging that EquaTerra is unprofitable, has performance issues and debt problems on some major contracts. Now granted, I've been AWOL for a spell in this market, but I found it highly unusual that TPI, whose reputation has always been the epitome of inflexibility and well, ahem (nous parlons la vérité ici), arrogance– was looking innocent and victimized in some way. Huh? First of all. I have pretty solid information that EquaTerra is not unprofitable and there are no debt issues/repayments or credits being made to unsatisfied clients there. Whether or not there are performance problems on specific deals, who knows? Show me an advisor/vendor that doesn't have a dissatisfied client in the portfolio. That doesn't surprise me. What does surprise me is this spiraling negative spin in the market against EquaTerra. Where is it coming from? What is the motivation behind it?

As for as the intricacies behind the breakdown of the deal, our understanding (and we're pretty confident here) is that the deal finally broke down over distribution of equity on the part of the private equity class investors. For some of the terms and conditions to change the way some of the investors wanted it, TPI recognized it would create problems– they knew the combined company would ultimately fail if they moved forward under the PE investor's scenario. Remember, Monitor Clipper Partners (MCP) had the lion's share of the deal, as they are the owners of TPI (important fact). Oak Investment Partners could have equally been difficult, but certainly had a fraction of MCP's interest. Our calculated guess is it was MCP that was the final coagulant in the deal and forced the hemorrhaging.

So, in the end, as I was getting closer to what actually happened in that last week– leading up to what I believe to be an amateurish, unprofessional dis-engagement in the form of their hostile breakup release, I started feeling sorry for the principals of both firms. Even Denny. Who still hasn't returned my inquiries on this. On the one hand, it started getting very complicated to follow how these M&A transactions work with their preferred positions in the stock and their investor rights, etc. On the other hand, I started to feel like this was a private affair and I really shouldn't be meddling in their business. (Weird. I really felt that way.)

So what does it all mean? Not much. The question that remains is what will TPI (read: MCP) do now? Where will they go from here? TPI can't pull off an IPO on their own without more bench strength. EquaTerra is a young company. Their options are more varied. Their greatest challenge right now appears to be an image problem. That's fixable. The wild card is MCP. Interesting. What do you think?

Happy Birthday Surprise

So today is my birthday, and I'm out doing birthday fun things. I get a surprise call on my cell phone that the TPI-Equaterra (n'er to be Veritage) merger has been terminated today. I opted not to drop everything and scramble to make phone calls, but I did make a few. One source said it best, "Personalities clashing over every issue from future strategy to who drives the bus." Another source said it was valuation that was the final culprit.

I'll snoop around more on Monday. We'll try to do a follow up on the online version of GITS. I'll also print something more in-depth here.

Veritage story went to the printer

The Veritage story is out.  It went to the printer yesterday. You'll have to have a subscription to GITS if you want to read it.

I had a great chat yesterday with an old friend and source whom I suppose would like to remain anonymous. He suggested I elevate the discussion for this site to focus on what's truly innovative in the market, rather than covering the usual who's doing what in the market. It has some interesting possibilities.

Prepping for Launch Week

We're mobiling around here to get the blog launched to the ITSinsider community. I spent most of the previous two weeks researching, writing, and fact checking a story on the TPI- Equaterra merger for Kennedy's Global IT Services Report Newsletter. As soon as it's published, I'll post it on the site.

Part of my research on the newco, "Veritage" included looking up one of my old newsletters, The Integrator from 1992. I may have been the first industry reporter to report on TPI. The spectacular growth this business has enjoyed over the course of my career always amazes me. Denny McGuire (founder, TPI) had 5 employees when I interviewed him; he was almost shy and humble about his success. Denny was always charming and likeable. He plugged my newsletter in public forums, and both he and Warren Gallant (his first employee and ex-partner) spoke at my first industry conference. I got a kick out of how Denny would give me a backhand compliment by referring to my newsletter as the Vanity Fair of the business. It was a fair label and one that I privately enjoyed. You see, in those days, and to some degree it still holds today: this is not a widget business. It's a business about people– their personalities, their relationships, their debts, their loyalities, their motivations, their character. Tracking this business is about knowing the leadership of the business. Really knowing them– knowing how they'll behave in a situation based on past performance. I find it all fascinating. To be perfectly frank, the business of outsourcing sometimes bores me, but the high stakes, big business drama that drives these big deals and alliances is great stuff.

For all the billions of dollars and all the fanfare– it's the competition, the win, the score– that makes the game interesting. Twenty-first century gladiators. Who wouldn't want to write about that?

Where’s the sweet spot?

I' ve been spending time these weeks reconnecting with my network. Today, I had a nice chat with my old friend and colleague, Jack Sweeney, editor of Consulting Magazine. Jack and I have known each other since, Jeez, I'm not even sure– a long time. The magazine looks great; I'm particularly pleased he's doing well. It was good to catch up with him. He filled me in on a few things I was unsure of– namely Bob Howe's whereabouts these days and whatever became of George Shaheen…

I'm still wrestling with the where-in-the-market-do-I-want-to-settle-in question. There are good arguments on both sides of the debate (staying in the outsourcing market or going back to the internet services market). I'll keep soliciting good advice.