ARCK SYSTEMS

Case Facts
Arck Systems was a medium-sized manufacturer of enterprise servers

Arch Systems has just agreed to acquire Lux Software Inc.

Enterprise software market was growing more quickly than the hardware market

Instead of growing organically, Arch decided to purchase Lux Software, which was a leading
provider of middleware

For Arck, owning a dedicated middleware platform would help them better integrate their
hardware to the software applications that ran on it
Case Facts cont.
Arck made an all-stock offer which valued the company at 50% above its market
capitalization

core members of Lux Software’s engineering staff were given large stock option
grants that vested if they stayed at the company for three years

The deal contained no provisions for keeping Lux Software’s sales executives or
key salespeople

Chris Snyder, Lux Software’s EVP of Sales, announced immediately after the merger
that he was leaving Lux Software
Case facts cont.
Both the companies heads decided to keep the two companies’ sales forces separate for the time
being

Mynor found that Lux Software’s approach to sales management was similar to Arck’s in key
respects

First, both companies assigned salespeople to dedicated customer territories based on

geography and customer industry

Second, the sales organizations at the two companies were broadly the same

Third, salespeople in both companies had relatively wide discretion to set net sales prices for their
customers
Important Characters

Bryan Mynor
• Executive Vice President for Worldwide Sales of Arck Systems
• He was a 30-year veteran of enterprise hardware sales
• Sold mainframes to financial institutions in the 1970s after a career as an
officer in the U.S. Navy
• Joined Arck four years ago as the head of sales operations
• Promoted as the EVP of Sales for Arck two years later
• Arck’s sales had nearly doubled since his promotion
Important Characters
Rob Chatterji
• Chairman and CEO of Arck
• Made a major strategic decision to grow Arck’s software business
• Wanted to ensure that top engineering talent did not leave the merged company
• Agreed on keeping the two companies’ sales forces separate for the time being

Sharon Esteves
• Head of U.S. sales for Lux Software
• Chose to stay on in the merged Company
Important Characters
Chris Snyder
• Lux Software’s EVP of Sales
• Announced that he will leave immediately after the merger
• He took most of his sales management team with him

Evan Hong
• CEO of Lux Software and its longtime chief engineer
• Decided to stay at Arck for at least three years, as Executive Vice President of
Software Solutions and board member
Problem statement

Arck and Lux sales representatives have different selling techniques and methods
(Hardware Selling Vs Software selling) which makes sales force integration very difficult

Compensation plan for the sales workforce is not aligned i.e. both the companies follow a
different plan which is impossible to follow after Merger

Top Personals from the Sales force of Lux Software already started quitting after knowing
about the merger

6 month post merger Data suggests that 70 % of sales occurred in last quarter and that
too at a very high discounted rate . Same pattern is also visible at the 1st Quarter.
Possible solutions
Suitable training program which makes both the sales force competent of making cross domain selling

In order to retain “Top Guns” from Lux Sales, increase Basic pay for them which currently is half of Arak

Make a common set rules for increment which clearly focuses on constant above average Performance
(Min Deviation from mean)

There should be a upper limit for the discount rate at max a sales representative can offer
Thank you