View the Whole
When I look back at the M&As I've witnessed during my entire career, the most common mistakes typically result from a lack of taking into account the complete picture of the target company. Finance officers and bankers are always focused on the financials, analyzing how the acquisition is accretive to the business and the potential return it will deliver. A thorough financial analysis is rarely - if ever - overlooked.

What is overlooked are two other critical areas - employees and customers. Virtually all of the assets of the acquired company sit with the customers. The ability to seamlessly integrate the two companies and their products, instill confidence in the merged entity and retain customer satisfaction will greatly contribute to the success of a merger. Ignoring these customer-related aspects will spell disaster.

In the same way that customers represent a company's revenue potential, employees hold the passion and emotion of the business. If they leave, that spirit goes with them. I would argue that a significant percentage of M&A deals that fail do so because the merger caused key employees to leave.

The DNA that has been built inside a company includes the ability to attract and retain talent - an asset not listed on any balance sheet. It is critical to respect and leverage the entrepreneurial spirit of the acquired company - as well as insist on retention contracts - so that the lead talent will stay.

A focus on keeping employees of acquired companies happy is one aspect which has greatly contributed to EMC's positive M&A track record. Again, consider the Documentum deal. I'm sitting here in the original Documentum office, in the East Bay, near San Francisco. At the time of the acquisition, EMC didn't have any operations on the West Coast yet they recognized that in order to retain Documentum's talent, the company needed to keep these offices.

Merged companies can absolutely gain by optimizing the costs related to real estate and duplicative functionality - but only where the benefit outweighs opportunity cost. People are who make products and in order to realize the value of the products in an acquired company, it is important to try to keep the people happy.

Success Speaks for Itself
Since EMC acquired Documentum less then three years ago, the business has doubled in size. We could not have achieved that level of growth had we not merged with EMC. I remain an employee of EMC - as do several other CEOs of companies acquired by EMC. That's not a very common staffing situation in today's consolidation-frenzied software ecosystem.

There are many different approaches to acquiring companies. What works for one company may not work elsewhere. But EMC's level of success speaks for itself: Software now accounts for about $3.5 billion of EMC's total $9.7 billion in revenue.

After 40-plus acquisitions, EMC continues to grow our acquired businesses and innovation continues to thrive within them and across the company. We've retained talent, satisfied customers, gained market share and integrated offerings. If you compare those results to other recent high profile software industry mergers, I think you'll agree that there is a method to EMC's M&A "madness."

Dave DeWalt is president of EMC Software.

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