If starting a corporate dealmaking career with one of technology's biggest and most challenging acquisitions is a good way to get your feet wet, you could say Douglas Kehring got drenched.
As head of Oracle Corp.'s M&A shop, Kehring's first transaction was the $10.3 billion PeopleSoft Inc. purchase, an arduous deal that spanned 18 months from announcement to close and involved a stridently unwilling target, several raised bids and a Justice Department suit.
"It's a good learning experience to undertake a large and complex transaction at the outset," says Kehring, a senior vice president. "We faced the highest level of integration complexity with PeopleSoft, which has made it easier to handle subsequent acquisitions."
The watershed transaction was just the start for Kehring and the other top Oracle executives who get involved with the voracious company's acquisitions. Oracle has struck about 80 deals since PeopleSoft closed in 2005, and the company has been a major consolidating force in the enterprise software industry, striking multibillion-dollar deals to buy the likes of Siebel CRM Systems Inc., BEA Systems Inc. and Hyperion Solutions Corp.
It is that track record that led the majority of respondents to The Deal magazine's latest survey to name Oracle the Most Admired Corporate Dealmaker in information technology, based on the deals the company struck from 2008 through 2010. Oracle narrowly beat out IBM Corp., another extremely prolific software acquirer and a company that has long been a top rival in Oracle chief Larry Ellison's eyes.
Oracle got the top spot because of its well-honed skill at striking strategic deals that slide seamlessly into the company's overall long-term strategy. Indeed, it's not often that Oracle unveils a transaction that leaves observers scratching their heads or wondering about its rationale.
Oracle also drew praise for its deal execution, which is certainly an outgrowth of a wealth of experience in absorbing companies, Kehring says.
"We take a very rigorous and repeatable approach to execution and integration," he says.
The 38-year-old leads a team of 10 professionals in Oracle's corporate development group, which he describes as an investment bank within the company. It's a particularly fitting description, since Oracle shuns the use of outside financial advisers, even on its biggest deals.
Kehring's team is responsible for executing deals and managing their integration, and it partners closely with executives within Oracle's engineering organizations who sponsor a particular deal and are drivers of the decision-making process. The group essentially acts as a liaison between these groups and the CEO's office.
So far, 2011 has been a relatively tame year compared with years past. The company has announced six transactions with private companies, none of which were large enough to have warranted Oracle's divulging the price tag. In July, for example, it bought Pillar Data Systems, a storage systems company that had been funded by Ellison himself. It bought FatWire Software, a Web customer experience management software startup, in June.
While Kehring declines to discuss his perspective on the current M&A market, he was able to characterize Oracle's strategy as a mix of opportunity, value and strategic appropriateness.
"Our approach is one of being opportunistic when the environment is right and the pricing is right and the deal is on par with our strategy," he says. "We're not sitting around saying we have to spend X dollars on Y deals."
Last year, the company closed an acquisition far different from others before it. The $7.4 billion purchase of server maker Sun Microsystems Inc., which was announced in April 2009 and marked the largest technology transaction of that year, moved Oracle into the hardware world, one Ellison had eschewed for years.
Following the PeopleSoft deal, most acquisitions were application oriented, as Kehring puts it, and aimed to consolidate the enterprise software market. But after spending years building a software stack, it was time to branch out and offer the servers that run the software.
As Ellison put it after the Sun deal closed in January 2010, why not eliminate the need for costly IT services by designing enterprise-class hardware and software that are meant to be integrated from the get-go?
"You can do a better job by having all the pieces designed by a team of engineers that talk to each other," Ellison said at the time.
"As the Oracle tech stack has evolved and extended, we have undertaken acquisitions in other segments, whether they are OS or virtualization or hardware related," Kehring notes. "The fundamental strategy hasn't changed, but we are extending our capabilities to include other areas that help drive customer solutions."
Of all the deals the company has announced over the past decade, the Sun Micro hardware deal might have caused the most consternation among Oracle watchers. But the day the transaction was announced, Oracle shares shed only slightly more than 1%, a show of investor confidence that the company would make the deal work.
Oracle tracks each transaction for five years after closing to measure the financial return it provides. It also tracks more qualitative attributes, including employee retention and customer feedback. All of these data points provide lessons for continually honing Oracle's M&A acumen, Kehring says.
The executive's links to the Oracle brain trust stretch beyond his tenure at the company. He came to the Bay Area in 1998 to work at investment bank Dain Rauscher, where he met Safra Catz, currently Oracle's president. At the time, she was starting the West Coast software practice for investment bank Donaldson, Lufkin & Jenrette, and she quickly hired Kehring. A year later Ellison hired Catz, and in 1999 Kehring followed, starting work in Oracle's in-house venture fund.
The corporate investment effort at Oracle was snuffed in 2002 in the wake of the dot-com crash, and Kehring shifted over to work on M&A, just in time to lead the charge for PeopleSoft.
A recurring issue Kehring faces is trying to keep communication lines open with targets, both potential ones and the companies with which Oracle is in talks.
"Challenges come when dealing with and understanding the decision makers on the other side, which are different on almost every deal," he says.
To help with this, Kehring and his team continually meet with CEOs, boards of potential targets and the venture capitalists and investment bankers they work with to make connections that could pay off later. Outcomes are much more successful, Kehring says, if there's a previously established relationship that enables a frank and open dialogue.
If the popularity of Oracle's dealmaking style among The Deal magazine's survey respondents is any indication, Kehring's outreach, as well as his company's deal selection and integration approach, make Oracle's newly achieved Most Admired status well deserved.