Compuware: Time to sell?

Elliott Management offers to buy Detroit-based Compuware

By Rod Meloni - Reporter, CFP ®
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DETROIT - If you've ever spent any time with entrepreneurs you likely have heard how the game works.

Many love starting and building a business with the intent of selling it off once it gets large and profitable enough. Then, if they are young enough, they do it again, and again. For them it's about the challenge of taking an idea, building it into a smashing success and then moving on to the next.

Read more: Elliott Management offers to buy Detroit-based Compuware

While a wildly successful entrepreneur, Pete Karmanos is not of that ilk. He started Compuware with a couple of friends from American Motors in the 1970s and spent decades building a global software company. He not only stuck with the company, but felt compelled to use its profits to give back and revitalize to his decaying hometown. Yes, he started in Southfield, moved Compuware later to Farmington Hills as the company grew to its largest and then, following Mike Ilitch's lead, built his company headquarters in Downtown Detroit. That was only ten years ago when Downtown Detroit really looked like a ghost town. Today, Campus Martius looks like the downtown of any major American City, belying the squalor that can be found mere blocks away in most any direction. Karmanos always felt a responsibility to put Detroit on the comeback trail. He plowed millions into the city and especially put his money where his mouth was after that by backing many non-profits around town. That of course is on top of building a nationally known and respected cancer institute in memory of his late first wife Barbara Ann.

That Karmanos did all of that tells you something about him. He was not in it for the money alone, although he profited mightily and lives a jet set lifestyle. He ended up owning an NHL team just like Mike Ilitch. Yet, he has always marched to a different drummer. He battled mightily with Wall Street, never had much use for the analysts who thought his company did not comport to the Wall Street norm. His stock price often suffered as a result. Compuware has not always seen hearts and flowers either. It's hired and laid off thousands over the decades and that clearly has affected Karmanos over the years as well.

That leads us to today's events. A hedge fund called Elliott Management out of New York bought up roughly 8 percent of Compuware stock over recent time, has looked Compuware over and decided it's a mess. It declared today it can run better; Compuware can be made to operate more efficiently. It offered Karmanos and his Board more than two billion dollars to buy the whole company. The offer was timed to coincide with Karmanos' exit from his beloved software giant. Clearly Elliott sees an opening. Now the question remains will Karmanos continue marching to that different drummer and hand on or take the deal. The first offer seems a tad low considering it took only one trading day to get the stock up to the $11 a share offer. These are negotiations after all. But Karmanos and company are playing coy, as they should. This is a real game changer for the employees who own stock. They can get rich. It also will likely mean considerable layoffs as a turnaround appears on the horizon if there is a sale.

Perhaps more than the business nuts and bolts are Detroit's non-profits and their considerable needs and concerns. There are few benefactors more generous with their time and treasure than Karmanos. He could and likely would continue his largess if he sells off. But the company itself, owned by a hedge fund, is not likely to share his charitable ways. This has everyone in that community on high alert. No one would go on the record and discuss this today, but no one can ignore the sea change this would bring to Detroit.

This is how business works. It is no surprise as Karmanos looks to ride off into the sunset his company may not go there with him. Whether this deal ever happens it will matter greatly to the trajectory of Detroit's redevelopment. Is it time to sell? It probably ought to be. Pete Karmanos and his Board are the only ones who know for certain how this will go.

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