Post-Merger Integration: How I.B.M. and Lotus Work Together

AT 8:25 A.M. on Monday, June 5, 1995, Jim Manzi, chief executive of the Lotus Development Corporation, received an unexpected phone call from Louis V. Gerstner Jr., the chairman and chief executive of the International Business Machines Corporation.

I.B.M., Mr. Gerstner said, had just tendered an all-cash offer of $64 a share for Lotus, a storied software maker in Cambridge, Mass., and he hoped Mr. Manzi would come willingly to the deal. Shocked and surprised, the combative Mr. Manzi initially refused, spent two days seeking a white knight to keep Lotus independent and then grudgingly accepted the $3.5 billion buyout, the largest by far in software industry history.

This is the story — pieced together through interviews with many of the principal players — of what happened in the aftermath of that agreement. An anatomy of a corporate marriage that started out as the idea of only one of the parties, the story is a case study of the consummation and management of a high-profile merger, offering lessons that have resonance for C.E.O.’s in any industry, not just those in high tech.