E-MAIL MEMO NAMES DIVINE AS BUYER OF MARCHFIRST

Details Plans for a New Company

By Published on .

See text of e-mail below

CHICAGO (AdAge.com) -- In an e-mail obtained by Advertising Age and purportedly sent to a select group of MarchFirst employees late Wednesday, the company's Central Group and some other MarchFirst

assets "have found a buyer and the deal is all but complete."

The e-mail identifies the buyer as Divine Inc., which has been widely rumored to be a potential buyer of some of the troubled company's assets. The memo, which is believed to have come from HostOne executive Chris Vaughan, states that Divine has purchased assets including HostOne, a MarchFirst unit in the application services business. The deal may be announced today.

New Company
The deal, the e-mail says, calls for a new company to be formed "of the MarchFirst Central Group offices and a small number of other offices, HostOne, the SAP Practice, and several other assets and interests of MarchFirst. It continues to say that "the new company will be a wholly-owned and independently operated subsidiary of Divine Inc., a well-respected technology holding company based in Chicago."

The Central Group is believed to be composed of Midwest-based Technology and Brand Building Groups of MarchFirst.

A MarchFirst spokesperson declined to comment on the e-mail, as did Mr. Vaughan. Divine also had no comment regarding the deal.

Led by Ed Szofer
The new company, the e-mail states, will be led by Ed Szofer, currently chief development officer of MarchFirst, with Mr. Vaughan continuing to lead HostOne.

The e-mail also sheds light on the rumors of layoffs that have been swirling around the company for weeks. It states, "Unfortunately, the outlook for the rest of MarchFirst is not so bright. MarchFirst will be closing a number of offices and releasing approximately 2000 people tomorrow. Several other business units will be sold independently. That part of the business that cannot be sold will be closed over time, and the MarchFirst parent company will ultimately be folded. We do not anticipate a bankruptcy filing in the immediate future, although there may be a filing at some future point in time."

Interactive editor Catharine P. Taylor contributed to this report.

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TEXT OF E-MAIL

Below is what was sent out by the HostOne group. Central Group offices would be comprised of both Technology and Brand Building Groups.

We have found a buyer and the deal is all but complete. marchFIRST will announce to the public tomorrow that we have completed a transaction with Divine, Inc. for the purchase of a number of marchFIRST assets, including HostOne.

The terms of the deal are confidential, but the transaction will create a new company comprised of the marchFIRST Central Group offices and a small number of other offices, HostOne, the SAP Practice, and several other assets and interests of marchFIRST. The new company will be a wholly owned and independently operated subsidiary of Divine, Inc., a well-respected technology holding company based in Chicago. Our new company will be led by Ed Szofer. I will continue to lead HostOne.

This is outstanding news for marchFIRST and in particular for us. I am personally very pleased with the outcome of these negotiations. It is, in my view, the best deal we could have hoped for and the best opportunity for the long-term success of this business. HostOne is a critical long-term strategic fit for Divine and offers a number of important synergies with their current software holdings, all of which will unfold over time. Among the assets to be included in this deal is the intellectual property we have in iFrame, and it is the intention to continue with the platform and leverage whatever synergies we can. In the short-term, the intention is to continue to operate HostOne as a growing concern and integrate our services with the professional services of the new company.

Unfortunately, the outlook for the rest of marchFIRST is not so bright. marchFIRST will be closing a number of offices and releasing approximately 2000 people tomorrow. Several other business units will be sold independently. That part of the business that cannot be sold will be closed over time, and the marchFIRST parent company will ultimately be folded. We do not anticipate a bankruptcy filing in the immediate future, although there may be a filing at some future point in time. We will not be included in that process, as we will no longer be a part of marchFIRST at that time. The new company of which we will be part will be cash flow positive almost immediately, and backed by the considerable cash resources of Divine. HostOne is a going concern. This transaction will ensure that we remain that way.

In the short term, it will be business as usual. Our clients will be very concerned and will need help understanding what this means to them. Please channel those communications through the Relationship Managers, Tracy, and me. We will need to continue to solidify our business and progress toward profitability. Integration will begin almost immediately and there will be much work to do. I do not foresee any immediate changes, but obviously things will change as we define how we fit in the new company.

Many thanks to all of you who helped in preparing our due diligence materials and presenting our case to the potential investors. We did a fantastic job and this deal is our reward. In short, we have earned a second chance. What happens from this point on will be in our hands.

I will be working closely with the leadership and will keep you informed. Feel free to contact me with questions or concerns.

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