Looking back over the recent posts on the topic of the Merge takeover, I have to ask myself what I want to accomplish. The answer is simple: I want to preserve the AMICAS I knew. That's it.
Much of what Mike and I have published here reflects our trepidation at the manner in which Merge collected the funds to make the purchase. One has to remember the old Merge to understand this. Before the arrival of the current management/ownership team, Merge was approaching bankruptcy. There were some brushes with the SEC over a former CFO filing "materially false and misleading financial statements in the company's annual report on Form 10-K for the fiscal years ended Dec. 31, 2002, Dec. 31, 2003 and Dec. 31, 2004, and in the company's quarterly reports on Form 10-Q for the first three quarters of fiscal year 2005." But that's old news. Merge has reached the point that even in this day of tight loan money, they were able to score the $250 Million to buy AMICAS. Can you say "leveraged"? Seriously, though, we have to look more closely at the team that made this happen.
Merge was rescued from bankruptcy, oblivion, and irrelevance by Merrick Ventures, a venture cap firm that goes beyond most you've heard about over the years. Merrick is run by a gentleman named Michael Ferro, whom we have mentioned before. But just who is he and how does Merrick operate? From the Merrick site:
Michael W. Ferro, Jr. is the past chairman, CEO and founder of Click Commerce, Inc. Under Mr. Ferro’s leadership, Click Commerce posted 14 consecutive quarters of growth and profitability and acquired and integrated nine companies. During this time, the company’s stock value increased 900 percent. Because of Click Commerce’s industry reputation and proven ability to deliver results, Illinois Tool Works (ITW), a multi-billion dollar Fortune 150 company acquired Click Commerce on Oct. 24, 2006. ITW selected Click Commerce as the platform to launch their software and technology group.
Mr. Ferro is a Director on the Board of Trustees of The Chicago Museum of Science and Industry, The Field Museum of Chicago, The Joffrey Ballet of Chicago, Northwestern University and the Lyric Opera of Chicago. He serves on the boards of Northwestern University, The Chicago Community Trust, Children’s Memorial Hospital, Northwestern Memorial Foundation, Big Shoulders Foundation, and AfterSchool Matters. In addition to his civic and philanthropic activities, Mr. Ferro participates in several business organizations. He is the chairman of the Chicagoland Entrepreneurial Center and a board member of the Economic Club of Chicago. Mr. Ferro is also a member of Young Presidents’ Organization and The Commercial Club of Chicago. He is a graduate of the University of Illinois.
This list speaks to the contribution of a lot of time, and a lot of money. OK, I'm impressed. And humbled to some degree, as I can't imagine being involved in that many activities. I can barely balance work and my honey-do list. This side of the man is far from the stereotypical money guy. And, the Merrick philosophy carries this benevolence forward, with a very strong capitalistic attitude that gets the attention of us conservatives, acerbic like me or not.
Mr. Ferro was interviewed in late 2008 by the entrepreneurship website BusinessPov, which refers to him as "Tenacity Man". (I couldn't embed the video here, so you'll have to view it on the linked page.) This five minute clip tells us more than any biography. I've transcribed the key passages below, but you have to watch the clip to get a feel for how he thinks.
When asked, "what was your first mistake as an entrepreneur?" Mr. Ferro responded: "Growing too fast, not having the infrastructure in place, not understanding checks and balances, and thinking you can do it all. That was probably my first mistake. I still make that mistake many times, but we try to eliminate it as much as possible. And not having good mentors around. When I first got started, I was just relying on my own gut instinct, and that's not enough to build a good company."
Merrick had just purchased Merge prior to the interview. Ferro noted: "We own half of a public health company called Merge health care in Milwaukee which we just bought 100 days ago. That company has almost tripled in value since we did the deal. It was beaten down. They were a company worth a billion dollars three years ago. They spent $80 Million in the last 16 months, they just burned through their cash. We were able to buy the company for a very very low amount to take a controlling stake in it. It's a company worth $50 or $60 million dollars and it used to be worth a billion. Can we make it worth $500 million in the next three years? That's our goal and we think we can."
Again, watch the whole thing. Five minutes well-spent.
The other fellow in the equation is Justin Dearborn, the Merge CEO. From Forbes:
Before I wrap it up, let's look at Mr. Ferro's answer to the question, "What makes a good entrepreneur?"
I have said before and I'll say again that the AMICAS acquisition was an incredible piece of business strategy, probably the greatest coup ever in the PACS world. Being a physician, with stereotypically poor business sense, I have tremendous respect for those who made this happen. (Those who know me well will confirm the sincerity of that statement. I do not play games or kiss backside, especially in a public venue such as this.)
Merge has wasted no time in streamlining the AMICAS operation, which is a nice way of saying they got rid of a lot of people. I realize that this is often what happens when one company takes over another. My advice to you, Mr. Ferro and Mr. Dearborn, is to reverse that decimation to the degree still feasible. Many of the good people that were let go have already landed in other positions. That says a great deal about their expertise and quality, given the economic situation of today. Others are "on hold" for the moment. Many of them are the heart and soul of AMICAS. They ARE AMICAS. They are what you bought with the company, and you need them. In particular, please reconsider the dismissal of the Version 6 development team. You may have excellent coders at your disposal who can reconstruct the programming, but not soul of the software. I know these people; they are very, very good at what they do. They built what you bought. They understand the program, and they understand me and what I need.
I am not a businessman, but I am a physician, a radiologist. I have been in private practice for 20 years, and I have worked with PACS for 17 of those years. I know PACS from the user's standpoint. The company you bought, the PACS you bought, helps me take care of patients, and they are the most important consideration. I need your software to do my job well. Trust me, give me the honor of mentoring you, take advantage of my expertise. You spoke of infrastructure . . . AMICAS had the infrastructure in place to build upon, and that infrastructure was its people. Don't take that away. Merge is now the largest of the "small" PACS companies, and I do think you can grow it back to the half-billion mark, with a little luck and a lot of work. All you need is the right people behind you. You know where to find them.
Perhaps we'll get a chance to chat on Thursday.
Merrick embraces the ideas of Benjamin Franklin, Milton Friedman and Daniel H. Burnham. Merrick desires to fundamentally affect the outcome of the significant economic and social transformation our country is currently undergoing. America's greatest competitive strength is its unique ability to take advantage of the commercial, political and entrepreneurial freedoms founded in the United States.For what it's worth, Mr. Ferro and Merrick have donated to a number of political candidates, mostly Republican, but also to a few Democrats here and there. Notably, there was no contribution to Chicago's favorite son that I could find, and I heartily approve of that omission.
Merrick offers an industrious and ambassadorial environment where our companies can thrive in a culture that promotes the responsibility of leaders to pursue philanthropy and economic endeavors to the benefit of both individuals and the community.
Benjamin Franklin discerned the keys to making America great and posted many words of wisdom in his Poor Richards Almanac. Franklin's sentiment that, "So much for Industry, my Friends, and Attention to one's own Business; but to these we must add Frugality, if we would make our Industry more certainly successful," applies equally to entrepreneurs and business leaders today as it did to the people of 1757.
As Milton Friedman said in 1962, "If an exchange between two parties is voluntary, it will not take place unless both believe they will benefit from it. Most economic fallacies derive from the neglect of this simple insight, from the tendency to assume that there is a fixed pie that one party can only gain at the expense of another." Merrick creates a synergistic amalgamation of proven business leaders and philanthropists who are dedicated to helping build emerging capitalists interested in centralizing their corporate endeavors in Chicago.
We offer our entrepreneurs and companies the same sage advice as Daniel H. Burnham bestowed upon us in 1911 when Chicago was being built. "Make no little plans; they have no magic to stir men's blood and probably themselves will not be realized. Make big plans; aim high in hope and work, remembering that a noble, logical diagram once recorded will not die, but long after we are gone be a living thing, asserting itself with ever-growing insistence. Remember that our sons and our grandsons are going to do things that would stagger us. Let your watchword be order and your beacon beauty."
The views, ideals and prophecies of the great influential capitalist leaders of America's history provide the fundamental values and intellectual guidance for the principles and values of Merrick.
Mr. Ferro was interviewed in late 2008 by the entrepreneurship website BusinessPov, which refers to him as "Tenacity Man". (I couldn't embed the video here, so you'll have to view it on the linked page.) This five minute clip tells us more than any biography. I've transcribed the key passages below, but you have to watch the clip to get a feel for how he thinks.
When asked, "what was your first mistake as an entrepreneur?" Mr. Ferro responded: "Growing too fast, not having the infrastructure in place, not understanding checks and balances, and thinking you can do it all. That was probably my first mistake. I still make that mistake many times, but we try to eliminate it as much as possible. And not having good mentors around. When I first got started, I was just relying on my own gut instinct, and that's not enough to build a good company."
Merrick had just purchased Merge prior to the interview. Ferro noted: "We own half of a public health company called Merge health care in Milwaukee which we just bought 100 days ago. That company has almost tripled in value since we did the deal. It was beaten down. They were a company worth a billion dollars three years ago. They spent $80 Million in the last 16 months, they just burned through their cash. We were able to buy the company for a very very low amount to take a controlling stake in it. It's a company worth $50 or $60 million dollars and it used to be worth a billion. Can we make it worth $500 million in the next three years? That's our goal and we think we can."
Again, watch the whole thing. Five minutes well-spent.
The other fellow in the equation is Justin Dearborn, the Merge CEO. From Forbes:
Justin C. Dearborn served as managing director and general counsel of Merrick Ventures, LLC (with its operating entities and affiliates, are referred to collectively to as 'Merrick Ventures') from January 2007 until his appointment as Chief Executive Officer of the Company on June 4, 2008. Mr. Dearborn has diverse experience in operational, financial and legal roles. Prior to joining Merrick, Mr. Dearborn worked over nine years for Click Commerce, Inc. (which we refer to as 'Click Commerce'), a publicly traded software and services company that was acquired by Illinois Tool Works Inc. in October 2006. From May 2003 until May, 2005, Mr. Dearborn served as vice president of Corporate Legal Affairs and Human Resources at Click Commerce. Mr. Dearborn was appointed corporate secretary of Click Commerce on May 2, 2003. Prior to Click Commerce, Mr. Dearborn worked at Motorola, Inc. where he specialized in intellectual property transactions and also held management positions in Motorola's Semiconductor and Corporate Groups. Mr. Dearborn and holds a B.A. from Illinois State University and a J.D. from DePaul University. He has practiced law in the state of Illinois but no longer holds a license to practice law. Mr. Dearborn has served on our Board since his appointment as Chief Executive Officer of the Company on June 4, 2008.
I couldn't score a list of Mr. Dearborn's charitable activities, but at only age 39, I'm not expecting quite the same exhaustive list.
Before I wrap it up, let's look at Mr. Ferro's answer to the question, "What makes a good entrepreneur?"
Entrepreneurs who are willing to take direction are entrepreneurs who will succeed. That's my number one issue with most entrepreneurs. They say they want to come in, but what they really want is money and leads which I appreciate. That's what 99% want when they come to a meeting: 'Can you get me into this company or can you give me money?' And that's sweet and nice and I get it, I was there. But . . . if you don't take direction, and you are not willing to be humble and willing to have have humility and have rhino skin, you know, if you aren't thick skinned, you are going to fail. If you can't do that, if you can't take the help that people want to give, and listen, I understand it's hard, but somebody who can actually take it, thats what the guys out there are looking for, the men and women out there who have money and time and experience, they want people who will take their advice; it's OK, you don't have to take it all. . .The question is, will Mr. Ferro, if he's even aware of me and my rantings here on the blog, take even a little of my advice?
I have said before and I'll say again that the AMICAS acquisition was an incredible piece of business strategy, probably the greatest coup ever in the PACS world. Being a physician, with stereotypically poor business sense, I have tremendous respect for those who made this happen. (Those who know me well will confirm the sincerity of that statement. I do not play games or kiss backside, especially in a public venue such as this.)
Merge has wasted no time in streamlining the AMICAS operation, which is a nice way of saying they got rid of a lot of people. I realize that this is often what happens when one company takes over another. My advice to you, Mr. Ferro and Mr. Dearborn, is to reverse that decimation to the degree still feasible. Many of the good people that were let go have already landed in other positions. That says a great deal about their expertise and quality, given the economic situation of today. Others are "on hold" for the moment. Many of them are the heart and soul of AMICAS. They ARE AMICAS. They are what you bought with the company, and you need them. In particular, please reconsider the dismissal of the Version 6 development team. You may have excellent coders at your disposal who can reconstruct the programming, but not soul of the software. I know these people; they are very, very good at what they do. They built what you bought. They understand the program, and they understand me and what I need.
I am not a businessman, but I am a physician, a radiologist. I have been in private practice for 20 years, and I have worked with PACS for 17 of those years. I know PACS from the user's standpoint. The company you bought, the PACS you bought, helps me take care of patients, and they are the most important consideration. I need your software to do my job well. Trust me, give me the honor of mentoring you, take advantage of my expertise. You spoke of infrastructure . . . AMICAS had the infrastructure in place to build upon, and that infrastructure was its people. Don't take that away. Merge is now the largest of the "small" PACS companies, and I do think you can grow it back to the half-billion mark, with a little luck and a lot of work. All you need is the right people behind you. You know where to find them.
Perhaps we'll get a chance to chat on Thursday.
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