In a classic “buyer’s market” move, Divine, Inc. (formerly divine Interventures) today announced signing an agreement with marchFIRST, Inc. to acquire numerous properties, offices, businesses and 2,100 marchFIRST employees, of the ailing Internet consultant. The deal is expected to close no later than April 2, 2000.
To close the deal, Divine, Inc. put up $10 million in cash and another $60 million in 5-year notes. Divine also will make an additional payment of $55 million if cash generated from the properties exceeds their expectations during that period of time. The assets are expected to generate about $250 million in revenue for Divine–immediately.
Divine CEO “Flip” Filipowski said that his Lisle, IL-based company had acquired about “19 or 20” offices that were principally part of the Whittman-Hart central operations, as well as a few others. He said Divine had also acquired marchFIRST’s $40 million SAP implementation practice, the HostOne ASP, the entire portfolio of BlueVector [marchFIRST’s venture arm], the Value-Added Reseller Business, ICampus, Joint Ventures and about $130 million in receiveables. It did not acquire any of marchFIRST’s software business.
About 2,100 employees would also be brought over to the new company, Divine Whitmann-Hart, with about 700 hailing from Chicago.
“We selected what we wanted and did not take anything that we wouldn’t collect on,” said Filipowski. “The receiveables are primarily from Blue Chip clients. We will emerge with an appreciable amount of revenue. We will not need to to spend the $300 million-plus in capital that [Divine has in cash reserves].”
Divine did not take on any debt/liabilities of marchFIRST.
Flip added that the acquisitions fit well with Divine’s business model. Edward Szofer, who was Whittman-Hart’s president until it was merged USWeb/CKS Inc. to create marchFIRST in 1999, will lead the company.
Flip had little information, however, on the future of what was leftover of marchFIRST after he picked the best of what it had to offer.
“We certainly have been very empathetic to what marchFIRST has gone through,” Filipowski he said. “I believe they’re going to try to manage their assets. We don’t believe there’s an imminent bankruptcy for them.”
Today’s announcement culminates an intense, rumor-filled week for the troubled marchFIRST, that included Nasdaq halting the trading of its stock on unconfirmed news of its decision to lay off another 2,000 employees. And this was just two weeks after it postponed the payment of a $53 million loan to Bank One in a classic cash-crunch signal.
Two weeks ago, CEO marchFIRST Robert Bernard, previously head of Whittman-Hart, resigned from the company along with others in its executive team, as a result of Francisco Partners, the investment firm who put $150 million into marchFIRST last year for a one-third stake, tried to protect its investment.