2. Selling The Sourcing Business

3. Why Did We Buy It? Deal Done During The Go-go Days of The Tech Bubble!
Acquired ABC in March 2000
Strategic Rationale
Foothold into enterprise software apps
Key strategic customers (e.g. WalMart, Macys, GAP, Dillards, Timberland, etc)
Believed sourcing was an attractive growth opportunity
Got an instant development & PSO organization
Purchase Parameters
Number of Enterprise Customers: ~30
Purchase Price: $100M+
Financing Terms: 5% cash; 95% stock at over $100 per share
Deal Done During The Go-go Days of The Tech Bubble! 2

4. What Happened After We Bought It?
Discovered software was poorly constructed
No APIs, No web interface, etc
Poor due diligence prior to purchase
Market opportunity was smaller than expected
Application features/functions addressed a narrow market
Longer than expected sales cycles
High tech spending bust during the past 3 years
Poor post merger integration
Some of the key people left relatively quickly (Mary Jane, etc)
Cultural conflicts and missteps as XYZ tried to transition to an enterprise software driven business model
Financial incentives evaporated
XYZ stock price plummeted in tech spending dive
ABC shareholders couldn’t sell because they were in a lockout period
Operating performance issues
ABC sold 30 licenses prior to the acquisition and we have only sold 4 since then
XYZ inherited a lot of customer complaints and anger about the software performance
Classic Post Merger Deal Execution Problems Followed! 3

5. THIS IS ONLY A PARTIAL VIEW OF THE DOCUMENT.