Walter Bauer ordered a stack of hot cakes from a waitress at Du-par's in Encino one morning last month, making it clear that he wanted the butter placed on the side instead of directly on his food. It was the kind of kind of crisp, authoritative instruction one would expect from a man used to being in charge.
Indeed, until last June, Bauer was running Informatics General, a $200-million-a-year computer software business based in Woodland Hills that employed 2,600 people in more than 25 offices worldwide. That job came to an end, however, when Dallas-based Sterling Software acquired the company in a hostile takeover.
Bauer, who will be 62 on Friday, now leads a quiet life at his home off Ventura Boulevard in Encino, working as a business consultant, serving as a director of a Menlo Park software company, raising money for charity and playing tennis. It's far from his life as chief executive who ran the fourth-largest independent company in the U.S. software industry, but Bauer says he's busy and happy nonetheless.
'Like Losing a Child'
Still, he sometimes broods when recalling how the firm he founded and nurtured for 23 years was taken away. "It was like losing a child you raised to manhood," Bauer said.
Bauer says the fight drained him emotionally, bruised his ego and made him cynical about the system he says allows healthy companies to become easy prey for takeover specialists. Yet he's also quick to add that he isn't a sore loser, that he lost a fair fight to an opponent who played within the rules. It's the rules he doesn't like.
To make the takeover game fairer, Bauer supports new federal laws and regulations. For instance, Bauer advocates requiring the buyers of a company to pay all stockholders the same price for their shares to prevent them from acquiring control of a firm at one price and getting the rest of the stock more cheaply.
Frank Talk about Takeover
Bauer took his lawyers' advice and kept his mouth shut publicly while the takeover fight was on, but now he speaks freely about the battle and what it did to him. Last month, he gave a talk to the Los Angeles Rotary Club and plans to address a data processing conference in Houston in May.
Bauer's story provides a glimpse into what it is like to be an executive under siege in a takeover war. In Bauer's case, it threw his daily routine into disarray.
He says he never slept more than two hours at a stretch during the two-month battle with Sterling because he couldn't stop thinking about the endless meetings he needed to schedule and telephone calls he had to make.
A typical workday started at 6 a.m. and often ended about midnight. Sometimes he rose as early as 4 a.m. to call investment bankers and attorneys in New York as they were arriving at work. Weekends also were spent on the telephone talking to advisers.
Bauer said he was swamped by a confusing series of events that began "taking on a life of their own." Snap decisions were made that sometimes backfired, like the time Informatics and Sterling each wasted $80,000 on full-page Wall Street Journal ads that never ran because they lacked necessary approval from the Securities and Exchange Commission.
Pressured Decision Making
"There was so much going on that there wasn't time to get the SEC approvals," Bauer said. "Time seems to collapse. You are trying to do things that ordinarily would take weeks in just a matter of days."
The events leading up to the takeover started in late 1983 and early 1984. After seven years of improved earnings, Informatics stumbled. Net income fell 45% in 1984 to $4.7 million, dragged down by two unprofitable divisions. One casualty was Informatics President Bruce T. Coleman, considered Bauer's likely heir, who was fired by the board of directors.
The company's stock, which traded as high as $34 a share in June, 1983, fell to less than half that price by early 1985. The company developed a reputation among some analysts as a laggard that was too diverse and fat with cash.
Informatics raised $50 million in two stock offerings in 1982 and 1983 to buy other software companies, but it couldn't find the kind it wanted.
Ripe for a Takeover
By early 1985, the company had $40 million in cash, or about $8 a share, on its books at a time when its stock was trading at about $16. That made the company a sitting duck for a corporate raider, even though it had taken some anti-takeover measures.
"It's not a good idea to have a large amount of cash in a company for such a long time without some plan to use or distribute it," said Clarence W. Spangle, retired Memorex chairman and a member of Informatics' board of directors during the takeover fight.
Several computer industry firms approached Bauer about a merger, including Sterling. But Bauer resisted. He said he didn't think shareholders would get a good deal then because the stock was selling at such a low price.