In July 2010 U.S.-based Deltek acquired the Danish IT company Maconomy. Both companies provide enterprise solutions to project-focused companies. So, was this a hostile takeover of a small Scandinavian company by a bigger competitor from ‘over there’? No, quite the opposite. In both companies, we truly believe it’s a great match.
By Hugo Dorph Executive VP and General Manager, Deltek, Inc.
In the spring of 2009 I get a call from Kevin Parker, CEO & president of our main competitor in the U.S. Deltek. They want to acquire Maconomy. Of course, my first question as CEO of Maconomy is “why?” Then again, we both know it makes perfect sense. We both serve project-focused businesses and both companies boast deep knowledge of our clients’ industries. It’s the core reason behind our product success. This kicks off a year of intense negotiations involving very few people. And on July 9, 2010, Deltek successfully acquires Maconomy. Why did Maconomy’s leadership and our shareholders support the acquisition? The reasons are manifold and I will attempt to describe them below.
Join forces: Create a leading market position
Based in the United States and Denmark, respectively, Deltek and Maconomy were quite familiar with each other prior to this year’s merger. Both companies regularly popped up on the same shortlists when project-focused organisations went looking for a new business solution. Deltek and Maconomy were aware of each other’s strengths and there was a deep mutual respect between the two companies. And for good reason. There is an astonishing scarcity of end-to-end suppliers of project-focused enterprise solutions in the global market, and Deltek and Maconomy were among the world leaders in their own right. By joining forces, the two companies could create a truly global vendor and the unrivaled leader in this market.
Growth, not consolidation
Deltek did not acquire Maconomy as a defensive move to consolidate their position in the project-focused enterprise solutions space. On the contrary, this is a growth case for Deltek for a number of strategic reasons. Acquiring Maconomy made great sense for Deltek due to Maconomy’s strong market position in Europe. Deltek could have gone head-to-head with Maconomy and other competitors away from its home turf, but the complexity of penetrating new markets in the enterprise applications industry should not be underestimated. Conversely, Maconomy had been extremely successful in its main European markets (Scandinavia, UK, Benelux) but had trouble matching that position in the United States. Another reason why Deltek and Maconomy constituted a special match is its largely complementary customer bases. Deltek knew Maconomy was strong in key project-focused verticals like agencies, consulting, and accounting, to complement Deltek’s own stronghold verticals such as government contracting, architecture and engineering. Furthermore, Maconomy has managed to capture and retain a number of exclusive customers through the years, including three of the top four global agency networks and three of the top five global audit companies.
Unique sweet spot
By joining forces, Deltek and Maconomy are able to dramatically accelerate the growth both companies have attained in recent years. We have both invested heavily in new product development and consulting competence to stay abreast of customer demands. The two companies operate in the same unique sweet spot in the market for enterprise applications software to project-focused companies. With our niche focus we offer much deeper specialisation and client business acumen than large, generic vendors like Oracle, SAP and Microsoft. At the same time, we offer a more comprehensive, end-to-end business solution and worldwide delivery capability than smaller, local vendors. That’s how both companies remain highly competitive.
The integration process has begun
The very day that Maconomy de-listed from NASDAQ OMX Copenhagen in July, we went to work on integrating the two companies.
Despite differences in size and the fact that Deltek had acquired Maconomy, Deltek management displayed tremendous openness and interest in pursuing the best practices from both companies. There was good chemistry between the two sides as well as a deep understanding and team spirit from the very first handshake. It was like catching up with a long lost relative, as Kevin Parker put it.
It’s not just about the products
Deltek’s focus on growth was apparent from the outset. The very first initiatives were about growing Maconomy product sales in North America and Deltek product sales in Europe. That was reassuring to clients and employees on both sides, addressing the natural concerns that arise from big change. Actions speak so much louder than words in those circumstances, not least during acquisitions and organisational integration.
Deltek also embraced Maconomy’s vision and leadership style as important contributions to driving and integrating a global and culturally diverse business. One clear indication of this is that the merged company will rely on two ‘centers of gravity’ going forward – one in Herndon, Virginia, and one in Copenhagen, Denmark.
For Maconomy as well as Deltek, there was another key benefit in bulking up as a combined company. Both companies are quite accustomed to going head-to-head with much larger and more powerful competitors with well-established global brands when project-focused companies need to select a new business solution. Customers naturally seek out the safe choice when making ERP investments – simply because of the magnitude of that investment. It’s easy to opt for the largest and most well-known vendor, but many customers have paid a high price for learning that picking a large unfocused vendor involves greater risk than selecting a small specialised vendor. The most critical risks are associated with the vendor’s lack of understanding of the customer’s business. Nevertheless, we can all agree that the safest choice is a financially robust, highly skilled global specialist. That’s exactly what the combination of Deltek and Maconomy is all about. We aim to become the unmatched enterprise solution vendor to project-focused companies. Additionally, our sheer size (1,500 people and counting) allows us to take on much bigger jobs for our clients. We’ve already got a global organisation in place, and now we’re investing in our sales and consulting units all over the world to take full advantage of our global product portfolio and be where our increasingly globally operating customers need us to be.
Because it makes perfect sense
Even if Deltek and Maconomy have been treated as two separate entities for the purposes of this article, make no mistake. Our combined company is now called Deltek and we’ve already come a long way in gearing up for our future as one company. The ties between the former Maconomy and Deltek organisations are growing closer day by day. As a result of the recent merger, we aim at creating the undisputed leader in the market for enterprise applications software to project-focused companies. We think this move makes great sense for us as well as for our clients, and we are eager to share the news with the world. We have a long journey ahead of us, but I strongly feel that the right mix of openness, leadership, synergy, and customer insight will allow us to realise the full potential of our combined company. So I dare say that the ‘why?’ generated from Kevin Parker’s offer to acquire Maconomy that summer day in 2009 can still be answered: ‘Because it makes perfect sense’.