Two become one
As CFO, Sweet played a key role in the integration team that brought Dell and EMC together. Naturally, he concentrated largely on the financial structuring of the transaction, which took more than a year to arrange and involved bank loans, as well as the issuance of bonds and equities. Additionally, he was involved in setting the future strategic direction for the enlarged business.
The premise for the merger was that it would combine Dell’s expertise in enterprise servers, personal computers and mobile devices with EMC’s storage capabilities.
“The vision was there,” says Sweet, “so then the question was, how do we build out that premise in more depth? What are the strengths and weaknesses of the respective companies? What’s the competitive reaction? What’s the customer receptivity? Lots of work was done around those aspects of putting the two companies together to ensure we had the merger positioned properly, or at least understood where friction points might arise.”
Sweet went into the merger believing that it could also drive cost synergies through the rationalization of core capabilities, support functions and supply chains. “What we found when we got into it was that we mostly got the cost synergies we were expecting, with the exception of one area: sales,” he says. “But we also realized that much more reinvestment in the business needed to happen.”
As a result, much of the money saved went back into the business to build additional capability. And sales, an area where Sweet had expected to find redundant capacity, actually secured additional investment because the sales teams needed extra resources. “It was the right investment to make,” Sweet explains. “I remember sitting down with Michael and the sales leadership team and saying, ‘Look, I’m not a fan of spending money per se, but in this case it’s the right thing to do.’”
While the cost synergies didn’t turn out as anticipated, compensation came in the form of better-than-expected revenue synergies. Only about 20% of the combined customer base of the enlarged company already used both Dell and EMC. As a result, the sales teams had a strong opportunity to sell into the other 80% – an opportunity they seized.