1. UNISYSThe Merger of Burroughs & SperryGroup 5Mona, Prasan, Milin, Atman, Siddharth

2. The TeamMona Sharma Siddharth RPrasan Arora2 Atman Shah Milin Parekh 3. The Case at handUNISYS: The Merger of Burroughs and SperryHarvard Business School9-489-055 3 4. AGENDA Introduction to Burroughs and Sperry The Merger Trail Successful Blue Print Framing People & Cultural Issues The Emotional Change Experience Merger Analysis CULTURE: THT Model Impact of the Merger TOWS Matrix Unisys Today !! 4 5. The Man with the Plan W M Blumenthal was a man of variedfaces, politician, businessman,professor Inspite of having a politicalbackground, he firmly believed ineliminating cronyism Proactive personality who firmlybelieved in GOYA ! Werner Michael Blumenthal Former Chairman & CEO - Unisys 6. Timeline BURROUGHS SPERRY 1896 - William Burroughss invented the first1910 Elmer Sperry forms Sperry Gyroscope. Hepractical adding machineinvented the gyrocompass and other aeronauticaland directional marine navigational systems. 1905 - The company changed its name toBurroughs Adding Machine Co. and relocated to 1930 The company integrated with SperryDetroit corporation1953 - The company was renamed to Burroughs 1950s Sperry Corp. evolved as a management Corp and continued making adding machinesholding company for enterprises in aviation, defenseand navigation 1960- 1970 The overall mainframe markets growth slowed down causing a decline in1951 It acquired Remington Rand Corp., the Burroughs revenues founder of the first commercially viable computer 1980 The company appoints ex Treasury Secretary, Michael Blumenthal as the Vice 1980s It became a world leader in the largeChairman and CEO mainframe market 1980s - Burroughs expanded intodata1983 The companys earnings were affected by a processing, communication, and office automation disparity between the change in the cost of sales and the products1980s He successfully turned around thecompanys fortunes by increasing sales and1985 Its headquarters shifted from New York City doubling the ROEto Blue Bell Pennsylvania 1986 The company recorded its highest turnoverof $5 billion. 7. Company AnalysisPre-Merger BurroughsSperry Highly Centralized De-centralized - 4 businessOrganizationunits Lacked multiple capacities and Technology tailor made toPortfoliopoductscustomers ComputersComplete informationBusinessSystems Bottomline Oriented - systemsExcellence Oriented - systemsStyleefficiency and profitability high value and quality Region (geography) wise; Industry wiseSales Force except banking Product centric - "high degree Customer centric - highApproach of specialization amongdegree of orientation to functions and personnel" understanding needs of Strict adherence to budgets; customersHigh emphasis on R&D,Functional Financial and Operationaldesigning and marketingExpertise competence 8. Company AnalysisPre-MergerBurroughs SperryInvention of the AddingInvention of theMachineGyrocomapass + marine,Started with aereonotical and vavigational equipmentEfficient developmentProduct development delaysTimelines all across the orgainzationAggressive; Business mindedLoyal: Familial environmentPersonellenvironmentWork cultureApolitical PoliticalSystemDatabase mangement and Number crunchingfunctionality transaction processingSold principally to nondefense Strong in Defense systemsProficencymarketsDominantFinanceGovernment (defense)industriesDominantBelgium, France, UKGermany, Iberia, Italy,geographiesScandinavia 9. Why Merge ? Economies of Scale Financial Resources Increase in Market Share (10.76%) - critical mass & clout(IBM was75%) Helps to take on competition Best of both worlds (dual architecture) Customer overlap 5% Different core functions Different dominant industries and geographies9 10. The Merger Trail In the 1980s Sperry and Burroughs faced decliningprofits 1st Merger Mr. Blumenthal believed the two companies could fittogetherAttempt In 1985, he launched a merger attempt by offeringstock swap of $65. However, Sperrys managementdoubted its success Mr. Blumenthal made another bid for Sperry2nd Sperry tried to defend its position and broker a dealMerger with Honeywell but the talks failed In 1986 Burroughs offered $76.50 a share which wasAttemptapproved by Sperrys Board. The merger was valued at $4.8 billion 11. The Start of an Era 12. Mergers Reality Check Failure rates of M&A rangefrom 50 to 70 % Share holder value isdestroyed in more than 60%cases (BusinessWeek Study) Enterprise value is rarelyincreased (BCG, KPMGReports)Source: Getting It Together The Leadership Challenge of Mergers and Acquisitions Gunter K Stahl 12 13. Successful Blueprint 13 14. Framing People & CulturalIssues 14Source: Harvard Business Review China - Managing People and Cultural Problems in Mergers 15. The Emotional ChangeExperienceSource: Ivey Business Journal - 2008 15 16. Blumenthals PreliminaryPlanThe preliminary plan involved addressing 3 issues a. A rally to the cause Name the New Company b. Need to control potential attrition Through over-communication c. Approach to organizing the new firm creation of theMerger Coordination Council 17. Merger ImplementationThe Plan:1. Merger Principles:a. Partnershipb. Meritocracyc. Unity2. Merger Coordination Council was set up, forming six integration objectivesa. Develop new organization Merger Process b. Integrate marketingworldwidec. Review noncore businessesd. Consolidate operationse. Integrate products andtechnologyf. Improve financialperformance3. 12 Task forces were set up for dedicated problems 18. The Principles of the Merger Partnership A merger of equals The objective was to form a company that could compete with the 800lb gorilla (IBM) Meritocracy One of the most important aspects of the merger It highlighted the commitment of the management to form a stronger company Unity To form a new image post the merger and create its own identity independent from Burroughs and Sperry To achieve this objective, they decided to keep a new name, without showing bias towards any one company Dispatch Added later, because Blumenthal believed that delays lended fuel to uncertainty New motto was When in doubt, do it now 19. Merger - Challenges Debt Skeptical Wall Street $8-$9 EPS by 1987 Retaining both the architectures which were Culture19 20. CULTURE: THT Model Burroughs SperryRules Versus Universalism - people place highParticularism - rules are derived from eachRelationshipsimportance on rules circumstance/relationshipThe Individual Individualism - people believe in Communitarianism - people believe thatVersus The Group individual freedom and acheivementgroup is more important than the individual Specific - separate work and personal Diffuse - work and personal lives overlap;How Far People lives; reltionships dont impact much atreltionships are vital to meet objectives atGet Involved workworkHow People Neutral - reason influences people more Emotional - people want to find ways toExpress Emotions than feelingexpress their feelingsHow People View Acheivement - people value yourAscription - people value your performanceStatusperformanceSequential - people believe in staying onSynchronous - people see the past, present,How Peopleschedule; place high value on order andand future as interwoven periods, view plansManage Timepunctuality; "time is money" and commitments as flexibleHow PeopleInternal direction - people believe that Outer direction - people believe that theirRelate to Their they can control their environment toenvironment controls them; they must workEnvironment achieve goalswith their environment to achieve goals 21. Using THT to resolve a business dilemmaRealize and Root ImplementImpactReconcilingActions Reconcile ResolveCulturalDifferencesRespect Appreciate Cultural Differences Recognize IncreaseAwarenessTime 22. Operations Apolitical Financial10Product Oriented LOBHighly Centralized EPSOnly Computers Eco. of Scale MIS Market ShareBurroughs Apolitical New brand Cultural conflict Increase EPS fast Redundant Staff LOB R&D Complete IS Political Development Delays Operations - Cost0Sperry10 23. Impact of the Merger Burroughs paid $76.50 per share totaling to $4.8 billion Raised $1.74 billion dollars by selling its additional assets Cut workforce by 24,000 employees :- savings of $300 million The company was valued at $10.78 billion 40% of its revenues came from its industrial and commercialoperations and 35% from the financial operations. Adopted the LOB model to bifurcate its operations 24. TOWS Matrix24 25. Unisys Today !! After merger, PCs became a rage & the demand for mainframesdropped rapidly Unisys shifted to high end servers and IT services - business consultingand outsourcing Developed the UNISYS 2200/500 CMOS mainframe, and the Micro A(the first desktop mainframe) in 1989 Listed at #44 (tied) on the Top 100 Corporate Criminals of the Decadelist for the 1990s Was sued by the government and found guilty multiple times.(fraud, price escalation, failure to supply adequate equipment) Revenues down to $3.8 Billion Number of employees down to 2270025