Rob Ashe was on a golf course on a Friday afternoon six or seven weeks ago when he first learned that U.S. computer giant IBM wanted to buy Cognos Inc., the Ottawa-based business intelligence software firm he runs as chief executive officer.
He got a telephone call from Ambuj Goyal, who heads the information management unit at International Business Machines Corp., with which Cognos had done business for 15 years and, more formally, as a strategic partner for the preceding 18 months.
"Roughly a month and a half ago, Ambuj called me and said: 'You know what, we really like this partnership, we really like this market area - why don't we do this together?' " Mr. Ashe said at a meeting of employees at Cognos's head office in Ottawa held Monday to talk about the $4.9-billion acquisition of the company by IBM announced early that day.
" 'There's a whole bunch of new things we bring to the table'," Mr. Ashe quoted Mr. Ambuj as saying, according to a transcript of the employee meeting filed with securities regulators that provides the first behind-the-scenes glimpse at how the takeover offer came together.
"'We have people in geographies you're not going to be in for 20 years. We have access to accounts . . . we have thousands and thousands of sales reps out there in the marketplace.' "
What followed was about six weeks of due diligence by IBM officials, assisted by key Cognos executives who set up a data room with "1,600 separate documents in it" and "worked around the clock," Mr. Ashe told the employees.
And because of confidentiality requirements, he added, these were "people who can't talk about this and go home to their wives at night or their husbands and can't say anything about it."
Confidentiality was even more of an issue because there had been speculation for months that Cognos, Canada's largest software house and one of only a couple of independent firms left in the world making business intelligence and performance management programming, would soon be acquired and likely by IBM.
Early this year, Oracle Corp. bought out Cognos rival Hyperion Solutions Corp. of California for $3.3-billion, and then, on Oct. 7, just days after the Ottawa company and IBM began negotiating, Germany's SAP AG's unveiled a $6.78-billion takeover of Business Objects SA of France, Cognos's other main direct competitor.
An employee at the Cognos meeting early this week asked Mr. Ashe how he felt when he heard about the SAP-Business Objects deal.
"I wouldn't say I was surprised, given the extent to which it had been talked about," Mr. Ashe replied, citing media reports that a deal between the European companies was in the works.
"It was a little bit challenging as we began our discussions with IBM but, you know, it's just something we had to . . . keep confidential."
But a couple of days after SAP and Business Objects confirmed publicly that they had reached a deal, Cognos was forced to modify its repeated protestations that it was not interested in being taken out and that, if anything, Business Objects and Hyperion acquisitions strengthened its status as an independent.
One of its vice-presidents, Mychelle Mollot, told the Reuters news agency that Cognos was not opposed to being acquired by another company. "Acquisitions do not always preclude our remaining independent," she said, explaining she meant that Cognos's programs will always be designed to work with products from all other software vendors and not designed to work better with programs of any one company.
There are, in fact, questions about how whether Cognos succeeded in keeping the IBM talks entirely under wraps.
Rumours of a potential takeover rippled through the markets late last week, pushing the company's share price up a total of $4.33 (Canadian) or 9.5 per cent on Thursday and Friday combined in vastly heavier than normal trading volumes.
Mr. Ashe told The Globe and Mail on Monday that he believed the share price increase was the result of misinformation about a takeover but not a leak.
"There was a rumour in the market that we had cancelled some investor meetings, which is usually a signal that a company doesn't want to talk to investors and that something must be going on - when, in fact, no meetings were cancelled," he said. "There's been lots of rumours for 18 months and it happened to be heightened last week because of the rumours the meetings had been cancelled."
On another front, the Monday meeting transcript shows Cognos and IBM officials provided employees with little in the way of concrete information about potential layoffs and other matters, other than to say IBM is doing the deal to grow and expand, not to cut back and emphasize that there is no overlap between the two companies' products. In all, Cognos has about 3,700 employees, some 1,560 of them in Ottawa.
"So many companies out there to acquisitions and they do consolidation and expense reductions, so it's about profitability rather than their top-line growth," IBM's Mr. Goyal told the meeting. "Ours [are]about growth . . . Our strategy [is]that we want to grow this business much faster than it could do by leveraging IBM's global reach and access."
Mr. Ashe did concede, however, that some Cognos workers will lose their jobs, although the company will try to find alternate employment for those affected in the IBM empire.
"IBM is a very big company in Canada and [there is]lots of opportunity," Mr. Ashe told employees. "We live in a global environment now. So our objective is to make sure that we're providing jobs for everybody we absolutely can. But it's inevitable there will be some redundancy."
He also appeared to indicate that cutbacks that do occur will likely be in head office staff function areas where there may be overlap with IBM and which Cognos will no longer necessarily require once it ceases to be a public company.
While saying that he, along with chief operating officer Les Rechan and products senior vice-president Peter Griffiths will be staying on under IBM's ownership, he added that chief legal officer John Jussup, chief financial officer Tom Manley and Philippe Duranton, senior vice-president of human resources will be in "transitional roles."
Mr. Ashe also told employees he expects the deal to close in February and that the two companies are "beginning the integration planning right away." Redundancies, he added, will be identified as early as possible.