The Financial Times’ Richard Waters does a profile of Frank Quattrone in Thursday’s paper, pegging the return of Silicon Valley’s “most prominent banker” to the ongoing Data Domain-EMC-NetApp saga. Quattrone’s firm Qatalyst Partners is the sole adviser to Data Domain, the specialty storage technology company that is the target of competing bids from East Coast storage giant EMC, and its smaller Valley rival, NetApp.
Now, EMC’s Chief Executive Joe Tucci has not hesitated to publicly spell out why his company is playing spoiler in the NetApp-Data Domain deal. When EMC announced its $30-a-share, all-cash bid on June 1 — gatecrashing a cozy agreement where NetApp agreed to buy Data Domain for $25 a share, or about $1.5 billion — Tucci said he was surprised that Data Domain didn’t give his company the chance to bid before announcing the deal. “Particularly since I believe you should have been aware of our interest,” Tucci said, which as Reuters reported a few days later, meant that EMC had talked to Data Domain several times about business combinations, including an acquisition.
So why did Data Domain not run the usual process that a company wanting to sell itself follows? Typically, a company will use its bankers, board members and other top executives to discreetly spread the word. Word has it has Sun Microsystems’ bankers began sending feelers out in the fall of 2008, months before any real negotiations with IBM, Oracle and HP happened. Companies usually run this informal process to solicit expressions of interest so that all potential buyers have a chance to participate before a deal is finalized and announced publicly. Also, they want to avoid “public food fights,” as one tech banker I spoke to described it — nasty EMC-style aggression initiated by potential buyers who feel they were left out.
The banker said Data Domain’s deal to sell to NetApp smacks of the kind of “insider-y, clubby” deal Quattrone is known for — where two companies agree to merge because they like each other. As the FT story says:
The deal has raised questions about how effectively Data Domain, advised by Mr Quattrone’s Qatalyst Partners, has handled the process, in particular its acceptance of an initial, relatively low, offer and its advice to shareholders this week to reject one of the nearly matching bids on the table.