To acquire or be acquired; is that the question?

• Author: Horowitz, Alan S.
• Position: On the Cover - Cover Story

Mergers and acquisitions, the art of bringing together two companies either as equals (merger) or unequals (one acquiring the other), has been transforming the commercial landscape for generations. * Utah got a close-hand view of the power of M&A activity during the late 1970s and 1980s, when locally based drugstore chain Skaggs acquired a number of supermarket and drugstore chains, including American Stores in Philadelphia, Lucky in California and Jewel in Chicago, took the name of American Stores, and for a time became the largest operator of supermarkets in the country. * M&A activity, which tends to wax and wane with corporate trends and the economic climate, is still able to transform industries--as well as the economic vibrancy of the cities where the companies are based. Anyone interested in running or owning a business, moving up the corporate ladder, or just wanting to better understand the strength and character of the local economy needs an understanding of the M&A world.

M&A Activity of Note

The past several years have seen a number of notable national mergers and acquisitions, including Boeing's purchase of McDonnell Douglas, Hewlett-Packard's buyout of Compaq Computer, American Airlines' acquisition of TWA, Nations-Bank's takeover of Bank of America (while keeping the B of A name), the merger of Time-Warner and America Online, and Daimler-Benz's so-called "merger of equals" with (some would say acquisition of) Chrysler. All of these significantly affected their respective industries.

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ASSOCIATED FOOD STORES CEO RICH PARKINSON

Utah has not been immune. American Stores was purchased by Albertson's, which is headquartered in Boise. Smith's Supermarkets was bought by Fred Meyer of Portland, Oregon, which was subsequently acquired by Cincinnati-based Kroger, the country's largest supermarket operator. ZCMI, the department store chain owned by the LDS Church, was bought by May Department Stores of St. Louis, and the stores became part of May's Meier & Frank division, based in Portland, Oregon.

Brigham City-based Thiokol Propulsion, maker of solid propellant rocket motors, was purchased (as part of Cordant Technologies) by aluminum producer Alcoa and quickly sold to aerospace and defense company ATK (Alliant Techsystems Inc.) of Edina, Minnesota. Campus Pipeline was acquired by SCT Corp., and its headquarters are now in Malvern, Pennsylvania. And in early December of last year, California-based Symantec completed its acquisition of one of Utah's more successful technology companies, PowerQuest, the Orem-based software publisher.

But there have also been notable Utah success stories of growth by acquisition. Salt Lake-headquartered Associated Food Stores, traditionally a wholesaler, now owns 23 retail grocery stores, including Macey's, Dan's, Lynn's in Southern Utah, and Dick's and Winegar's in Davis County. And five acquisitions since 2000--including the recent $43 million acquisition of Michigan-based Wise Solutions, a vibrant application management technology developer on pace to earn over $20 million in 2003 revenues at the time of the acquisition--have helped put Lindon-based Altiris, a developer of IT management software solutions, on pace to exceed $100 million in revenue for 2003, only the company's fifth full year in operation.

Still, interestingly, some of the most troubled M&A deals of recent years involved deals with Utah companies sitting on both sides of the table. Provo-based Novell's acquisition of Orem-headquartered WordPerfect is an example of a deal that quickly went bad, forcing Novell to sell off its acquisition (to Corel of Canada) and take a big loss. Salt Lake City-based Franklin Quest bought Provo-based Covey Leadership Center (the combination is now called FranklinCovey), and the culture clash of the two entities caused considerable indigestion within the organization.

Perhaps the most notable (notorious?) example was the public squabble that grew out of the proposed merger of Zions Bank with First Security Bank. Though the two financial institutions had their headquarters on the same block in downtown Salt Lake City, neighborliness did not...