How to Execute Successful M&A as a CEO

Exploring high-impact M&A deals

At VMware, I was involved in the Nicira acquisition right after I joined. I also participated in the AirWatch acquisition and Carbon Black. I have seen many of these M&A deals and what makes them significant. 

Looking at Carbon Black, AirWatch, Sybase, and Business Objects, some of the bigger deals, and probably a smaller deal like OutlookSoft at SAP and VMware, these four or five deals taught me a lot. You always want to take some positive experiences from them, but there are also things you could correct if you could do some of those deals or new deals again.

We're a smaller company at Cohesity. We're not a public company with a lot of cash flow, so we've been cautious. We've done one or two M&A deals in our history. But this year, we announced our intent to acquire Veritas's data protection business, which is the biggest transaction in the space. 

It's a very creative deal. It hasn't closed yet, but we expect it to close later this calendar year. We announced it in February. The deal has caught the attention of many folks in the industry, whether you're a customer or in the industry, in terms of what the potential for this new entity could be and also for M&A deal-makers like yourselves in terms of the anatomy of the deal and how it came about.

Shaping the M&A strategy

At SAP, we were leaders in systems of record, such as accounting systems. The core idea was to transition from systems of record to systems of engagement that provide visibility into the core data that you collect. 

VMware, on the other hand, was the king of the virtualization space, excelling in things like thermal virtualization and core cloud infrastructure. As we expanded into devices and end-user computing, we recognized the need for a strategy that included mobile devices and endpoint security. 

This often involved an inorganic approach to entering new markets more rapidly than we could have achieved organically. However, before considering an M&A deal, it's crucial to establish a clear portfolio strategy and a company-wide strategy. M&A is not a way out of a strategic bind; you must have a well-understood strategy about where you are heading. The first priority should always be organic growth and building a product. 

Each company had a core organic innovation strategy—you have to build first before you buy. A partnership strategy is essential before considering a purchase because sometimes you may want to partner with a company before fully integrating them. 

The right approach to M&A is to have an inorganic strategy that complements a build-and-partner strategy.

Expanding and innovating through acquisitions

The transaction at Cohesity is a little different, but let's cover Easton very quickly. SAP acquiring Business Objects transitioned us from systems of record to systems of engagement, providing analytical and visibility tools that interact with your data in the accounting system. That was a breakthrough and made us the leader in analytics. Today, it would involve AI type systems. 

At VMware, we had the virtualization and cloud infrastructure well figured out on-premise. However, our end-user computing business, which was mostly virtual desktops, lacked a mobile device presence.

The acquisition of AirWatch instantly positioned us as the leader in mobile security tools, based on mobile device management, allowing us to build a significant digital workspace business. This enabled us to innovate much faster in end-user computing. 

Similarly, Carbon Black enhanced our endpoint security, further growing our end-user security capabilities. These are examples of inorganic moves that expand your portfolio because you can go faster through acquisition than if you were trying to build it on your own or partner. The reason for not partnering is the belief that the capability needs to be core to what you do.

In the case of Cohesity's deal with Veritas, it was more about consolidation in the industry. We felt the industry was too fragmented. Although there was some portfolio overlap, there wasn't much overlap in our customer base. 

Combining us, number eight, growing fast, with them, number three, highly profitable, would structurally provide the industry with a new number one. That's both profitable and growing fast. We are just imminently free cash flow positive.

We were waiting to go public. We could potentially go public now, but we felt that by delaying the IPO and putting these two companies together, we could go public as a much stronger entity in the next year. 

That was the idea behind announcing this deal. Once we close it and integrate, it should be a much more powerful combination than if either of us were to go public on our own.

It's significant, and the distance between us and some of the other competitors when we're number one is substantial. None of the other players compete with that. 

Of our profitable growth companies at scale, one of them is highly unprofitable but growing decently, and the other is slightly profitable but not growing very fast. The idea in any company is to create, as in my experience with SAP and VMware, highly profitable growth companies at scale.

In the case of VMware, it was $12 billion, and for SAP, now $30 million. It grew from $10 billion to $20 billion when I was there. The experience gives me a lot of ideas on how to build a profitable growth company here at Cohesity, and there's a path to create a $5 billion revenue company. These M&A moves have helped us get there.

The CEO’s approach to M&A integration

A part of me loves the art of the deal and the idea of doing things. I'm not a deal junkie, but I do appreciate bold moves. For example, coming to this country as an immigrant, I've known only one gear, which is to move fast. 

Sometimes, the best way to move fast is to swing for the fences. I would describe SAP's move to acquire Business Objects and OutlookSoft, which was the analytics move, as bold moves that SAP then followed up. It was the biggest acquisition that SAP ever made. 

VMware's acquisitions of AirWatch, Pivotal, and Carbon Black were even bigger, getting us into new markets. Pending the close of this deal, this will also be the boldest move this industry has ever seen. The data protection industry has reshaped quite a bit. 

You want to stay humble and hungry. Obviously, it's easy to look back at a deal, and I would say the four or five I was involved in, whether it's Business Objects, Sybase, AirWatch, or Carbon Black, I understand what made some of those successful and also why some of those weren't as successful as they could have been. 

I also know now, obviously pending the closures, that the jury on the context of Cohesity and Veritas will be out two or three years from now. It's too early for us to celebrate this. This is now just an announcement. We have to close the deal. We have to integrate it. But if we're having the same conversation in 2026, we'll have some early indications that it's been successful.

Within even 12 months, we will know it is being successful because we will be making a plan. We'll be on a path to go public. I always like to talk about deals in retrospect because strategy on its own without execution will be meaningless. 

While I'm very excited about what we announced in our intent to acquire Veritas, I would more likely want to come back and talk to you a year and a half from now. The deal has been closed, integrated, and successful. It has tremendous potential, don't get me wrong. I'm excited about it. However, you can't bask in the glory of a deal until after it's done. 

And even then, it's not just me. I might have the idea, but a deal team has helped me do it. It's the incredible teamwork of a village that makes these things successful. 

A lot of product engineering, a lot of go-to-market integration, a lot of people, like people at Business Objects, brought a lot of good DNA, worked inside SAP successfully for years, and then went on to do great things.

One of the things that's most important to me in the post-merger integration is getting people right because, most often, these M&A deals fail because people leave. 

A Harvard Business Review study said 90 percent of these M&A deals fail. And it's usually not because of strategy, some product issue, or some process issue, meaning you couldn't integrate the companies well; it's usually because people leave. 

In tech companies, our people are like athletes; they come in the morning and leave in the evening. We've got to do everything to keep people for many years. You can never keep them forever, but you want an M&A deal for the brain trust of that company to stay for two to four years. 

Beyond that, you can put golden handcuffs on them that are cash and equity-driven. But when they get excited about building a big business inside your company, the person leaves to start the next startup, and you have the possibility. And that's usually for a person either architecting or owning that deal. 

That's the job we have to do as business unit leaders or, now, in my case, CEO. We must ensure that the integrated team can act as one team. We're doing everything to break down the cultural barriers. 

For example, I advise people never to come in with an occupier mindset when they are doing an M&A deal. Remember when the Allies finally won against Germany and all the kinds of Axis powers at the end of World War II? The Allied forces occupied many of those countries. 

What resulted in the Soviet Union coming to Germany and the U.S. coming to Germany was that the U.S. and the allied forces pulled back and gave Germany some control, but the Soviet Union took over Germany. And you know what happened until Germany was reunited.

East Germany was just stalled from production, separating the Germans into two countries. A company acquiring other companies has to be very careful not to come in with that occupier mindset: "Hey, we now own you, and you need to do what we tell you to do." 

If you have ways in which you can make them better, you want to help them, but you want to let their innovation and their ideas be the ones that drive the company. So these are just the kinds of scars on the back of everyone who's done M&A number of deals that allow these deals, whether small or big, to be successful.

The mindset in a smaller company is about tucking it in, trying to keep it intact as much as possible. You don't want to decompose the acquisition into its arms and legs. Typically, when you acquire a company, all the business units say, "I want this piece, I want that piece." You kind of don't have a plan by which you can keep it intact. 

The more you can keep the company that you're acquiring intact and have as few people whose managers change, the better. That allows that unit to continue if they're doing good work. Where it needs to change, take engineering, for example. 

If you have a product team building a product, let them keep innovating. Of course, if they need to move faster, you help them move faster. But the more you make organizational changes and integrate things in, the more new managers appear, and sometimes, the parent company that is acquiring it, like all these people, comes out of its corners to try and reduce headcount in the acquiring unit.  

You want to, as the executive, protect that from happening. You want to try and keep that unit intact as best as possible and allow that unit to flourish. Certain DNA functions may be filled in marketing. You can integrate so that you have a unified approach to how the company operates or goes to market.

But engineering teams, you usually want to keep that intact because you don't want that innovation, especially if it's an innovative company that's moving really fast, to change. 

The more you stall that innovation, the more likely customers are going to lose that speed. Especially with a smaller company, in the context of Veritas, it's a bigger company we're acquiring. 

In a smaller company, part of the reason you're acquiring them is they have some speed advantage you don't have. And the worst thing you can do as a bigger company is stall that speed. 

I encourage you to keep the CEO of that company for as long as you can, give them the freedom to run things, give them goals, and then provide them a little bit like this example I use.

Imagine you're acquiring a company, and for them, the experience is going from walking up the stairs on foot to getting on an escalator. And they're still going to have to use their feet, but all of a sudden, this system, being for Business Objects or VMware for AirWatch, allows that person to go faster, and that's any CEO's dream if they can take their business. 

AirWatch was about a hundred million, and now, inside the end-user computing business, AirWatch is probably a billion. So it's perhaps one of the most successful acquisitions of that size in recent times. 

But imagine you could tell the CEO of AirWatch, "Hey, that hundred million you're doing on your own, I could double it faster than you can on your own." The CEO would be like, "Sign me up. I want to do that because they want their baby to be successful." In the case of AirWatch, the CEO, John Marshall, and the chairman, Alan DeBiry, were excited about that.

They stayed for two or three years, helped us reach that goal, and then new people in AirWatch came in who could help us take it further. And the AirWatch people today, I still get notes from them around Christmas time, saying, "Hey, thank you for all that you did to help AirWatch be successful."

For me, that's a tremendous joy to have. Many of these AirWatch people, even to this day, it was done in 2014, so like ten years ago. The deal was done in 2013. I think, I can't remember exactly, it was done in 2014. I think it was done ten years ago to this year. 

You want them to be proud of that moment because, for many of these people, it's their baby, and it became the heart and soul of some of the key aspects of what VMware now calls Workspace ONE.

I think that's how you want as you look back at these deals in the grand arc of time. So I would look back and say AirWatch was a very successful asset that helped VMware change the landscape of VMware's end-user computing business. And I hope the same thing happens here. 

If you came and talked to us five or ten years from now, or even well past, I'd be retired and gone from Cohesity 15 years now, whatever have you. If this company becomes a great company, it will be five, ten, or 15 billion, and this deal will be a key part of the reason it became that size eventually.

Key considerations in sourcing deals

At the end of the day, you're looking for a company that is a leader in its category. We did extensive due diligence on AirWatch before we acquired it. I had a lot of experience with AirWatch’s impact on the market. At SAP, where I was running the mobile business, I knew their position and how they were performing.

I talk to customers a lot. From these conversations, you get a sense of how well the product is appreciated. During due diligence, you want to engage with even more customers. I also spend a lot of time with the CEOs of companies we are looking to acquire. It’s crucial to get a sense of their culture, what drives them, and how they view life as you get to know them.

In the case of BusinessObjects, we acquired the company and they folded my division underneath BusinessObjects’ CEO, John Schwartz, who is a friend of mine. I actually worked for him for about a year. He left about a year or maybe a year and a half later, and then I took over all of the analytics business, including BusinessObjects.

It doesn't have to be the case where you're acquiring the CEO, and they work for you. In the case of BusinessObjects, I was working for the CEO, and it was the right thing for me and the company at that time. I had no ego about it; I wanted to see this business be successful. 

Whether you're acquiring the CEO and they work for you or you're working for them, if your goal is to create a big business, that's what matters. I was passionate about creating the best analytics strategy and business, which is what I aimed to do at SAP.

It just so happened that the company had now decided they were going to buy BusinessObjects, and it was great! Our analytics business got to be bigger. I wasn’t concerned about whether I was the CEO of that business or not. Eventually, I was running that whole business, but not at the outset.

You want to think about the best way to create the desired outcome. The way I approached Veritas is that it doesn't matter whether I'm the company's CEO, their CEO, or the board decides to hire a new CEO to run this going entity. We need to do what's right for Cohesity and Veritas and let the people's decisions be decided by the board.

That's the way unselfish leaders should operate. You've got to do what's right for the business, your customers, and your shareholders. And then if the board comes and says, “Sanjay, we want you to run it,” okay, good, I'll run it. 

But if they came to me and said, “Sanjay, we don’t want you to run this, I would say, who is the best person in the industry to run this company? Put that person in charge.” We are CEOs, personalities, and leaders with skills, and I’m not saying we’re all indispensable, but you don’t want to create a position of indispensability where you’re the only person who can run things.

Even if you are the CEO running things, you want to create a succession plan of people who can do it after you leave. For example, in the case of BusinessObjects, I worked with Steve Lucas, and my job was to groom him and get him ready so that, eventually, he could take over a good part of my role.

Thinking long-term is crucial. As Stephen Covey writes in "The Seven Habits of Highly Effective People," one of the habits is to start with the end in mind. It’s a life lesson. What do you want people to say about this business at the end of your journey? 

At SAP, we had a goal to create a $1 billion, $5 billion, and then a $10 billion analytics business on top of a $10 billion ERP business. BusinessObjects brought us a $1.5 billion business. We added in a half-billion-dollar business. That business got to about four or five. Then we added HANA, which was five. And before you knew it, this was a $10 billion business.

That’s how you should be thinking: How do you create a big business? In our case, we want to create a $5 billion revenue company here, and this deal is a very critical step to making that happen. That $5 billion revenue goal is a very big, hairy, audacious goal for a company our size. 

Many of our competitors will never get there. That’s the way I was taught to think through my experiences with SAP and VMware, and that’s my advice to any business unit leader or CEO contemplating an M&A deal.

Cultivating cultural alignment

Sometimes it's like a psychology test, like Myers Briggs, which I encourage everyone to do. I've done it multiple times, and we all have different personality types. This doesn't mean we won't culturally get along, but as you get to know someone, it’s a bit like a friendship or a very good friendship, which is a better analogy than marriage. 

You begin to understand the dynamics that make someone a good friend as opposed to just an acquaintance. There's something about the personality and chemistry. As you get to know a company, especially through talking to references, you start to understand their strengths and areas for improvement. 

Often, a company's culture reflects the values of the CEO and the leadership team. I spend a lot of time with the heads of HR of both companies, asking them about their people, and what they can handle, and looking at talent down to even the lower levels, like L4 and L5.

I've committed to inspecting every manager role in a new company. It may be several hundred roles. I may not know all of them personally, but I want to see the spreadsheet, and the PowerPoint to see who those names are. 

In some organizations, I have a strong opinion about the NWL and the L2s. This is not to be dictatorial but to ensure there's no cultural misfit. Often, I ask to meet people myself. I've done numerous Facebook or Zoom calls with people just to get to know them. 

When the CEO of the new company is willing to do that not just for the L1 people reporting but also L2s and L3s, it sends a strong signal.

My management philosophy is very different from the top-down, military ruler style. I'm very much a bottom-up, servant leader. 

I've spoken publicly about the fact that an organization's power is at its leaf level, meaning the foot-level engineers, the individual contributors, who are engineers, the individual contributors, who are sales reps, and then its fourth-level manager, who is an engineering manager or a district manager and sales.

This approach means that if I say something, people at the company's lowest level want to meet me. I can’t meet everyone, but they know I’m approachable as a CEO. If I send them a note that’s important, they'll read it. If there's an issue that I need to address at a customer site, where I need help from a rep, I’ll get it. That’s how you want to build a company. 

That’s the way I run business units, and how I ran Cohesity. Whether it's running a 100,000-person company like SAP, a 40,000-person company like VMware, or a 2,000-person company like Cohesity, the principle of how I choose to run the company remains the same. 

I might be a bit more approachable in a smaller company because it’s easier for people to get to me and there are fewer names I need to remember, but the approach doesn't change even in a large company. I could go to Germany and meet 10,000 people there, ensuring they knew I was approachable, and spend long hours talking to them in their beer gardens.

That approachability is key so that the rank and file of a new company feel inspired to join because they see that the leadership, exemplified not just by the CEO but the entire leadership team, is approachable and not sitting in some ivory tower.

Convincing companies to do an M&A deal

Any deal is a buying and selling process. For example, with AirWatch, it took several attempts. It wasn't just me; it involved our M&A team, Alan DeVere, and John Marshall. Ultimately, they agreed. There's a blend of cultural, soft factors and hard, tangible factors like price. It's never just one or the other.

Doing deals is like a friendship or a dating relationship. People know you're interested. You don't have to be explicit about it. You might ask them about their vision and where they see themselves going when you meet. Can we help? You start not by asking if you can acquire them but by exploring how you can help their business grow faster. 

I might suggest starting with a partnership. But then you hint that, eventually, we might need to own this technology. You approach this cautiously, thoughtfully, with respect. 

For a founder, it's their baby. You don't presume they want to sell. Sometimes I'm not fulfilled. “Let's stay in touch. I'd love to get to know you better.” “I'd like to partner with you. How can I help you?” You want to be their friend to help them. It's different with a public company because of the stock price and ensuring shareholders are okay. 

You want to be on the radar of those you want to acquire or be acquired by. Alan DeBerry and John Marshall at AirWatch were talking to me because they wanted to ensure I didn't buy their competitor. They knew if I walked away from AirWatch, there was another company I could acquire that was similar to them, and they wanted to make sure we didn't acquire them.

There's always a bit of give and take. You always have options. You don't want to get so enamored with a company that you overlook alternatives. What if someone else acquires them before you do? Good boards always ask, "What if you can't acquire this company? What's your Plan B?" When we acquired AirWatch, we had a Plan B and Plan C. We thought everything through.

When we were going to acquire them, granted, it was not a public company; it was a private company. It was a little easier. We did this in complete secrecy. How do you ensure that they can't proactively talk to people while you're talking to them?

Good M&A people know how to handle these deals. You do it in a way that if it falls through, you never want to be in a position where your company strategy is compromised. You should never build a strategy where your whole plan falls apart if someone else buys the company before you publicly announce it. 

Fortunately, with a lot of capable people around me, some of whom have joined me again here at Cohesity, we work hard to make sure it's a success. You want a lot of input, even once you announce the deal.

I describe this as a post-M&A announcement phase, then closing the deal, and finally integrating it. You want to have a big set of ears. I always tell people to use their two ears more than their one mouth. 

Once you've announced the deal, you'll be surprised by the number of people who will give you advice. Great, what's your advice? Everyone wants to talk because we announced the deal. You listen first, then speak.

This approach also applies when dealing with customers. We think about the roadmap with the joint products of Cohesity and Veritas. We’re not allowed to strictly write code that integrates these products because we're two separate companies, but we have some well-formed ideas. 

We start by sharing our ideas with customers but are much more interested in hearing their input. You don't want to appear as though you don't know what you're doing, but you lay out your ideas and leave the canvas wide open for changes.

The same applies to people integration. I have an idea of what the new company's org chart should look like. You put it out there and get input from a few trusted people in your circle. It might be the board or a couple of executives that you really trust. 

There's a brain trust of people you can trust in any of these situations. I tend to make decisions in the council of several people who I consider part of this brain trust.

I'm never the smartest person in the room, but as I hear more advice, I get smarter about a particular issue. Finally, I can articulate a synthesis of ten people's ideas into two or three key bullet points. That's the job of the CEO. You want to be able to hear everybody's advice and distill it into actionable steps. 

I think the three or four build ideas here are for how we do anything, whether it's the product roadmap, people integration, communication plan, financing, time to IPO, or any of these things.

We're very fortunate. We have a great team. I believe several great executives from Veritas joined, and that same thing existed in every deal we did. BusinessObjects at SAP had a great team with some great executives coming in. Sybase and AirWatch at VMware also had great teams. These are some of the key recipes for ensuring a deal's success.

Maintaining key relationships

It's a matter of how much you want to be able to do the deal. If it's not a priority, you might not call that person as often, but if it's really an important priority, you don't want to sound overeager by calling them constantly.

It's like any other friendship. If it's important to you, you nurture and water that relationship and spend time with them, not just over the phone or on Zoom calls. You meet them in person, you break bread with them. 

A relationship in business is like a friendship. You build it, you water it, and watch very closely what needs to get done. And if that deal drifts away to somebody else. 

There are deals I wanted to do, some of which I can't discuss because they are confidential, that we couldn't get done because the price was too high, or we had a change of mind about the CEO of that company. 

But I don't look back at that and say, "Oh my gosh, SAP's or VMware's strategy was badly flawed because we couldn't do that deal."

We're disappointed, we move on. That's how you should approach it. In the litany of M&A deals that have been done, that's also why I view M&A as something that can't be your primary strategy for the company. It has to be a second or third strategy. You don't start a company and say, "The first deal I'm going to do is an M&A deal."

You build a company, you build a product, you get some substantial revenue, and then you might do a token acquisition, get acquired, or merge. The wise process is to make M&A a secondary or tertiary part of your strategy rather than the primary part.

Best practices for managing large-scale acquisitions

Another one would be the ecosystem. In our world, there are a set of ecosystem partners: the cloud players, the security players, the system integrators, and the hardware players. In the ecosystem, you know who the key people you want are while you're thinking about an M&A deal. They are also in an ecosystem of other players. 

If you want to talk to that ecosystem, you obviously can't share the deal with them. For example, the day before we announced the Veritas Push acquisition, I called the CEOs of AWS, Microsoft and Google Cloud, and the security players and Dell, IBM, Cisco, and HP—the key players in our ecosystem.

I called them personally because I wanted them to know tomorrow we were doing a big deal. It was announced past the evening, so they knew something was coming. Giving them a little notice made them feel honored that I was giving them a pre-warning of what was going to come tomorrow.

That was an important deal, and many of them appreciated knowing what we could do together as a result of this. I think that's the job of the CEO to really reach out ahead of time to the ecosystem, not to everybody on the planet, but there's a core ecosystem of players that are very important to you in the industry.

You need to know who those are and have relationships where you can call and basically say, we have an important announcement coming tomorrow. Can I give you a five-minute update? Many of these folks I've known for decades. I can call them on their cell phone directly for five minutes. They know me well enough that they'll take a call.

So that's the job of a CEO, in terms of building ecosystem relationships because often you play in the context of a deal with other key ecosystem players. Then the same thing with customers. I called a couple of key customers, but I did that after the deal was announced just to make sure that they knew if they were key customers of ours, they would be wonderfully taken care of.

Then, of course, customer outreach lasts for weeks and months because that's not like day one. Well, the day one, you want to have a comms plan of who you're going to call, and maybe there's a day minus one of who you're going to call. Much of that, the days leading up to a deal, it's very busy, not just for the PR and the AR and the press and analysts.

That's an important part of the communication spot. But you also want to call a set of partners and customers, some of them the night before—I call that day minus one. Day zero is the day you announce it, but then, sort of, day zero, day one, you're working the phone with customers primarily and then partners to make sure that they're very comfortable with your strategy.

Strategic considerations for a global expansion

A big part of the rationale for the Veritas acquisition is that they have a very strong international business. We look at how much we do internationally, how much they do, where we're doing in the U.S. So, there's an international aspect of the growth that provides some complement, but those are all some of the questions you ask during the course of due diligence. 

It's like a jigsaw puzzle. What do I have to offer the market in terms of product and geographic presence and where do they fit in complement to that? Product geographic expansion, partner ecosystem, customer base—there's a variety of those things that when you put together, you want to be able to say, "Okay, there's not a lot of overlap."

This becomes, I like to call it, a "one plus one equals eleven" kind of move. It’s not just one plus one equals three; it’s one plus one equals eleven. I like that. 

So those are the kinds of things that we think through as we prepare for the strategy. All of us have done this during due diligence before we even announced the deal.

The right timing for announcing deals

Usually, you want to be in a place where it's not being crowded out by some other major announcement in the world. For example, you don't want to do it on New Year's Day. You want it to get some bang for the buck, so you time it because as long as it doesn't get leaked, you can pick a day that's not coincidental with another event. 

Sometimes it's a benefit. At VMware, we like to announce deals at our conference because it's our event and we can announce a big deal there. However, if it's not your event, like if you're trying to announce something at Amazon's big AWS, you're going to get lost in all the news there. It's not going to catch. 

But if it's your own customer conference, like Amazon announcing a big deal at AWS, that makes sense. Outside of that, you pick a day that's not going to collide with the news. You typically won't announce it on a Monday or Friday; it's usually a Tuesday or Thursday.

The thing that often circumvents that in public deals is a leak. Typically, these deals tend to have a way of leaking, and once it leaks, you're kind of forced to react because someone else has broken the news for you. 

You don't want to be in reactive mode. You also want to be in a place where once you've got it all prepped, you may have to pull the trigger earlier because some press report is leaking it. Then you're prepared to accelerate that entire communications plan to the public if you end up having it.

But I've never had a situation where news has leaked weeks before. It's usually within the delta of days. For example, with Cohesity Veritas, we had planned to announce it on a Wednesday or Thursday, but by Tuesday, it started leaking. Okay, now we just pull the trigger and announce it one or two days earlier.

But by that point, it was so close to the outcome, that it was within a day or two of what we wanted to announce anyway, and it was all ready to go. We just pulled it in earlier. We said, okay, let's go. We're going tomorrow morning. Those are just game-time calls that you can make, and a very good communications team can help you with that.

The impact of market timing on acquisition strategy

This is a good part of what we could still go public on our own at Cohesity. We're approaching capital positive and, very soon, this quarter or early next year, we will be capital positive. That's the early points of growth. So we're high growth and low profit or imminent profitability. 

Veritas has lower growth than us but high profitability. When you put the goal together, I believe in profitable growth. That's what I knew at VMware. Profits count a lot more than growth at any cost. 

Up to 2021, in the era 2009 to 2021 of low interest rates, it didn't matter as much if you were profitable. At some point, you were just getting skyrocketing valuations that eventually dropped. That gravy train is done. 

With rising interest rates and the end of easy money, you're going nowhere if you don't have a path to profitability. You can go public, but you won't get the valuation multiple you deserve or should get. You won't be able to see an expansion in your stock price until you show profitability or a path to profitability.

I can give you many examples of companies that have gone public and have not achieved the valuation they would have liked because they don't have a path to profitability. At VMware and SAP, we were very proud of the fact that we were very profitable businesses.

Advice for CEOs on preparing for a successful IPO post-acquisition

In an acquisition, you want to make sure the deal is accretive. If it's not accretive because you're diluting the company on margin, you want to get back to the profit levels that you were at. 

Many of the companies we acquired at VMware were less profitable than us, but we had to make it accretive. For example, when we acquired AirWatch, it diluted our profitability somewhat, but we expanded the growth.

In due course, we absorbed it and raised our profitability levels to what they needed to be. So, for a one-year hit, if you're expanding your growth and your profitability takes a bit of a hit, the CFO might accept that because you're sacrificing some profit margin for growth. 

But if it makes you highly unprofitable, especially if you're borderline profitable, that's going to put real pressure on you not to do those kinds of deals.

Every CEO has to work that through. Having a good CFO helps you decide if that deal is affordable and worth doing. Once you've done that deal, you want to take that company and have at least four quarters where you can show integrated success. There's a lot that could go wrong in an M&A process, especially if it's a big deal.

All of our plans for the merged entity of Cohesity and Veritas were on a spreadsheet, on paper. We had to go through it quarter by quarter. After three or four quarters, we could say that this thing has some long-term viability. We could see some patterns, we were able to predict our forecasts. Going public is not the destination; it's a milestone.

You want to have predictability. The worst thing to do is go public and not achieve your expected long-term stock growth. All you get is temporary liquidity. At the end of the day, you're back to worrying about stock prices not going high enough. It's much better to have a company that's got sustainable growth and a viable path for a five or ten-year period.

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