The ultimate open-source M&A 'poison pill'

Luis Villa commented on an earlier post wherein I had asked, "Why doesn't Oracle just buy Red Hat?" His remark was, "Because Red Hat employees would leave en masse."

Think about that. To the extent that an open-source company is driven by a culture of freedom, would-be purchasers might be put off by one of two things:

1. A business model that doesn't mesh well with open source (especially the GPL), or
2. An open source company culture that rejects the acquiring company's culture.

The first hurdle can be overcome through education or adoption. This is what happened with Novell. Novell acquired Ximian, in part, to get its DNA. That DNA continues to inform and guide decisions at Novell.

The second hurdle can't be overcome by any amount of subtlety or deception. Given that open-source businesses are driven by the people who write the code and build communities, a hostile takeover simply won't work. You lose the people, you lose the company, you lose your investment.

Is it the ultimate poison pill? If so, what are the companies that can credibly acquire an open-source company? IBM? Yes. Novell? Yes. Oracle? Maybe (Oracle has cultural fits with some open source-based companies, though not with all). Adobe? SAP? BMC? Etc.

Thoughts?

[matt_roder]

Exit Strategy

Does this conflict with possible exit strategies?

[botchagalupe]

It's just business as usual

I look at OSS as just a new business delivery of the same old model, with the keyword being business. The idea of collaboration and unique cultures in startup software companies has been around long before open source. It has always been very difficult for large culture companies to assimilate smaller companies with a free wheeling culture. There are a few factors that come into play to make a successful transition.

1) Typically the assimilating company starts letting out sign post of the impending changes. Therefore trying to weed out the employees that might not be comfortable in a new environment.
2) Usually the employees that stick around have a vested monitory interest in the acquisition. Also a successful acquiring company will provide incentives to the new key employees to stick around.
3) The most important factor is how the assimilating company handles the transition. I have seen failures and successes in my experience. Take IBM?s acquisition of Lotus in 1995. They did a brilliant job assimilating that company. I have direct experience with the Tivoli acquisition. Here again IBM did a great job in the assimilation of a unique culture. Tivoli was a 50 million per year revenue company that was defining/inventing ESM and CORBA based standards. IBM paid 600 million dollars for Tivoli. The running joke was that even the secretaries became millionaires. They let Tivoli basically run as an autonomous company for 2 years. A lot of the senior staff had two year contracts. After the first two years a fair amount of original employees left and created new startups and the other?s stayed and became true IBM?rs. More recently. IBM is assimilating another unique culture in Micromuse and that seems to be going quite well. I can also give you a bad example of assimilation (BMC?s purchase of IT Maters).

I think the important thing to remember is that as OSS moves out of the kumbya phase and matures into real business models fulfilling real business needs (which I believe will happen) in the end it will be just business as usual.

[botchagalupe]

Correction...

That should have been "IT Masters"