Tuesday, March 21, 2006

"DevCo" - 5 weeks after spin off announcement

This post is either early or late depending upon your point of view.  I have a lot to cover here.  First off, I'd like to mention that “DevCo” now has a General Manager.  Actually we've had this particular general manager on board for nearly a month, but have only recently gotten the final approvals to go ahead and publicly talk about it.  Basically, the delay was because you just don't go public with certain management changes before you've told the affected teams.

Effective April 1, 2006, Nigel Brown, Borland's current vice president of EMEA, will take the helm as general manager of Borland's IDE products. In this capacity, Brown will lead Borland's IDE product lines with support from a world wide team of engineering, marketing, services, sales, and G&A professionals from within Borland. He will play a key role in preparing the structure, team and plans for the divestiture of these product lines, and in managing this business once the sale is complete.

Brown has played an integral role at Borland for nearly a decade, and is credited with helping to grow the company's European operations to the $100M business that it is today. Brown has over 21 years of experience working within the IT sector and expertise in running global business operations. Matthew Thompson, Borland's senior vice president of worldwide sales, will serve as head of the EMEA region for Borland until a replacement is named.

Nigel Brown Background Information

Nigel Brown Vice-President and General Manager EMEA

Nigel has spent 21 years in the IT sector. He comes from a strong international sales and marketing background and has been with Borland for more than 9 years. Prior to this he was International Vice-President at Uniplex, joining from Lotus where he held positions of UK Corporate Sales Director and International Marketing Director.

Before being appointed to his current position Nigel was Managing Director of Borland’s UK operations and director of global accounts.

During the last 6 years Nigel has been running Borland’s business operations across Europe, Africa and the Middle-East. In addition to running offices in UK, France and Germany he also established new offices and companies in Sweden, Finland, Spain and Italy and expanded a partner operation across East Europe and the Middle-East. He has been personally involved in negotiating many of Borland’s largest customer contracts over the years with for example Ericsson, Nokia, Siemens, British Telecom, UBS, Barclays Capital, etc. Whilst being responsible for growing Borland’s direct ALM business in EMEA, he has also been Borland’s most successful region in selling the IDE products through an indirect business model.

Nigel has a BSc Honours degree in Management Sciences and a Diploma in Industrial Studies from Loughborough University UK, along with a Diploma in Marketing from the UK Institute of Marketing.

Meeting with Bear-Stearns

In other news, we had a long meeting this morning with a bunch of folks from Bear-Stearns, who has been retained by Borland to broker the spin-out.  This was our chance to finalize and walk through the financial models and plans with someone outside the company.  While Bear-Stearns has been heavily involved throughout this process, I got to finally meet with these folks face-to-face.  They played the part of the grumpy investor and ask a bunch of leading and probing questions.  Most of the questions were centered around how we arrived at certain numbers, what assumptions were made, and how the whole back-story plays into the financial model.  After dodging arrows for a while and taking copious notes, the Bear-Stearns guys indicated that it all looks really good.  We still have to tweak a few details here and there, but overall the models are holding together.

We also were able to get an idea of all the various steps that are typical of a transaction like this.  So here's a quick list of those steps as I was able to understand.  No time frames are laid out mainly because they are dependent on so many uncontrolled variables, that it would be silly to even speculate.  The ordering of some items may also be suspect since I'm filling in a few holes with what I see as common sense.

  1. Determine high-level feasibility of doing a spin out and decide to do it.
  2. Initiate internal process of gathering specific financial data on products (revenue, costs, profits, etc...)
  3. Publicly announce intention to spin out.
  4. Continue internal process of gathering financial numbers and creating business models while concurrently gathering interested parties.  Get Non-Disclosure Agreements in place.
  5. Send out investment memorandum that is the results of steps 2 and 4.  This contains an overview of the business along with current and projected revenues, costs, and profit or loss (P&L statements, balance sheet, etc).
  6. Recipients begin validating and mulling over the memorandum.  They also begin to formulate an initial offer or bid.
  7. Investors that are ready to move to “the next level” provide some real statement of intent along with an initial bid.
  8. At this point, some more heavy due-diligence can begin.  This is where more of the “virtual data room” is opened up.  Borland will be looking at the investors' offers under more scrutiny.  Like where are they getting the money, do they actually have what they said, etc... 
  9. At this stage, presentations to the individual investors will begin.  These presentations serve to allow the investors to pick our brain and basically “get comfortable” with the team, the business, and the opportunity.
  10. Once the presentations are done, the bids are finalized and the Borland exec team will select an investor.
  11. Final documents outlining the terms of the sale are then drawn up.
  12. Sale is publicly announced.
  13. The final bits of due-diligence and work needed to actually close the deal is done at this stage.
  14. The deal closes and “DevCo” is separated from Borland.  It will either be an independent concern or part of some other company (strategic investor).

Those are very high-level steps, and certainly don't convey the effort and work that is involved with each one.  Where are we in the process above?  Don't know if I can really say except that it is someplace near the top of that list.  For only 5 weeks of real work, we are doing quite well.

As we enter the 2nd quarter beginning April 1st, the spin-out products, teams, and management will be operating as a quasi-separated business.  We'll still be part of Borland.  We will continue to be responsible for generating revenue for Borland just like they are responsible to be carrying the costs of the business on their books.  The good thing is that it is beginning to look and feel like a separate business.  I can already begin to see some changes in the attitudes and excitement among the dev team members.  Folks are also starting to see this new company taking shape within Borland.  I can certainly start going down the path of comparing it to the gestation of a child within it's mother's womb...  But I won't and leave that to you... :-)

UPDATE: There seems to be some confusion regarding the outlined steps above, both internally and externally.  For reasons of confidentiality I did not intend to imply that these steps are what is being strictly adhered to.  They were merely outlined as “typical of a transaction like this.”  Some steps may be in different orders and some may be skipped altogether.  Also, there are some things I'm simply not privy to so I cannot even comment.  The way I see it is that most folks who do these kinds of things already have an idea, at a macro level, of what steps are involved.  Just like the process of buying or selling a home, most folks are aware of the various steps, yet the ordering and timing of those steps will vary, sometimes drastically, from transaction to transaction.


  1. As always, thanks for the update and insight into this divestiture process, Allen.

  2. Stephane WIERZBICKIMarch 21, 2006 at 8:52 PM

    Thank you for kepping us informated

  3. Excellent feedback, as usual.

    I hope that Nigel Brown understands the importance of the type of open communication that you are engaging in here - unlike some of his less illustrious predecessors.

    Try not to get too frustrated when you find things getting bogged down - IME, simpler transactions that this hit a few roadblocks when the lawyers get involved.

  4. Welcome, Don Johnson!

  5. So if I sell my 4X4 on Ebay because the UK tax has just gone up on such motors, wil I be able to buy the IDE biz. ;-)

  6. Interesting, except, of course, the board has stated a desire to have the tranaction completed by the end of Q2, the statement of "No time frames are laid out mainly because they are dependent on so many uncontrolled variables, that it would be silly to even speculate." means that either he or the board is being silly.

    Borland is gearing up for step 9 already and appears to be up to step 8(Or darn close to it), it all seems to be moving mighty quick. I assume that since we are told that there ARE interested investors that we can assume that borland has at least reached step 7.

    This said, it seems to be matching the board's stated timeline so far.

    Um, from the description, it appears that this guy is just a top sales manager of a very large division who is now in charge of the IDE division?

  7. "It will either be an independent concern or part of some other company (strategic investor)."

    Best part of the news... means either independent or functionally independent.

  8. This seems to be a good step forward.

    Keen to watch further developments.

  9. Thanks Allen! My preference is, of course, a separate company. These products are what enabled Borland to grow to what it is today. IMHO, if it happened once, it can happen again! Keep the passion!

  10. " It will either be an independent concern or part of some other company (strategic investor). "

    Which is inline with the whole concept of divestment (which basically means to get rid of). Kinda blows the whole previous hypothetical answer of owning a small portion away, as that would not be divestment, but rather a re-organization with private invesment partners. Which would, of course, be a totally different thing.

    Telling shareholders you were divesting when you were just reorganizing into a joint venture would probably result in people in dark suvs, dark suits, and dark glasses getting involved. Which is why I pretty much dismiss any hypothetical explanation that involves this possibility.

    Sure, sure, you could argue that I'm being too litteral and nitpicky about details, but being too litteral and nitpicky about details is what those fellows in the dark suits are all about.

    That said, I'm all for an independant company or the division sucked into a pre-existing company whole, proving the whole affair is properly handled and properly financed instead of a rapidly evolving high-speed trainwreck.

    Sadly, I am a pessimist at heart and I've seen nothing to convince me otherwise.

    Hope for the best, plan for worst, expect something even worse than what you plan for.

  11. One consistent theme I've noticed is the idea Delphi is being acquired buy another company is downplayed. It would seem to me that a buyer would have been announced earlier and we are receiving damage control spin.

    Europe, Africa and the Middle East have always had a stronger Delphi/Kylix user base than the United States. Nigel Brown would actually be a good choice to spearhead Delphi and Kylix development especially if he can bring the same business model.

    The big question is will Borland really throw out the baby with the bathwater. I'm hoping they do. If they don't Delphi/Kylix will continue to be held hostage by poor management.

  12. Bill -> Borland has announced they want to sell the division in the hopes that it will drum up interested parties to bid for it. This is not the result of an outside party trying to aquire the property (and they turned that down last fall claiming that Delphi was core to their vision of the company's future)

    Effectively, I suppose this makes it something of a buyer's market unless they have 5 or 6 rabidly ecstatic bidders with seriously deep pockets.

    Instead, we keep getting told that it's a seller's market and how valuable and profitable the division is, that they just don't have the where-with-all to pursue IDEs and chew bubblegum (oops, I mean sell ALM products) at the same time.

    I don't suppose this makes it spin so much as psychosis, but that's only my opinion.

    And yes, Borland IS famous for it's management decissions. Keep that in mind as you consider their past,recent, and future announcements.

  13. Stephane JouanneauMarch 23, 2006 at 5:18 PM

    Yeah ! Nigel ! President !

  14. Congratulations of taking one more step to kill Delphi.U guys have the credit to kill such a powerful tool

  15. Hi

    Information when we need...like always !


  16. I still feel the ALM stuff should go as Inprise and the IDE stuff as Borland.


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