By the next morning, Project Blowfish had relocated to Washington, DC. Bevilacqua's idea was to start at the highest level and then drill down. So the first item on the agenda was to have Caplan give a detailed overview of the company: a narrative of Telebanc's founding, its early days, its strategy for the future, products that it was developing that were unknown to outsiders. Everyone on the E*Trade side -- from it to HR to finance -- attended the meeting. "That was helpful," says Bevilacqua. "You had people with different skills hearing the big picture: Why we are doing this. Why this makes sense. And not hearing it from us, but from Telebanc people who explained what Telebanc is all about, why it is what it is, and why it's the leading Internet bank."
But the overview was only the beginning. Representatives from different disciplines within Telebanc made presentations to the whole E*Trade team, on everything from HR practices to marketing strategies to risk management and asset origination. Although it may seem strange to force an investment banker to sit through an HR presentation, Bevilacqua believes in the process. "One of the best ways to ensure the integration of two companies is to make sure that the executive team of the company that's doing the acquiring has completely bought into the vision for the acquisition," he says. "That way, they're clear on why you're doing it, who you're doing it with, and what the plan is for the future."
At 9 PM that night, a full 12 hours after the meeting began, the presentations ended. But instead of retreating to their hotel rooms, mixed groups of E*Traders and Telebancers headed out for late dinners. At around midnight, Bevilacqua got back to his hotel, where he spent two more hours making calls and answering email.
If the previous day was all about the big picture, this day was about delving into the details. From 8 AM onward, many of the same Telebanc officials who had presented earlier trekked back to the Brobeck offices with information and documentation that they had gathered overnight to respond to E*Trade's detailed questions. This time, the presentations were done on a specialist-to-specialist basis.
Meanwhile, Telebanc was getting a sense of how fast Bevilacqua and his crew could move. Bevilacqua and his team of outside lawyers and accountants had finished a draft of the merger agreement and related documents. That morning, he presented the documentation to Telebanc, which spent the rest of the day reviewing it.
After a long day of doing due diligence, the E*Trade team got together for a session of brainstorming, data sharing, and discussion. That's when Bevilacqua's idea of exposing all of Telebanc's business to the entire E*Trade team really began to pay off. "These were very open discussions," he says. "I encouraged people from the finance side to put questions to our technology people, so that all of the cross-disciplines could sort of dig in together."
Make-or-break day. Bevilacqua woke up thinking that if they didn't put a valuation on the deal today, there was no hope of meeting the one-week deadline. By midafternoon, word came in that Telebanc was amenable to the broad terms of the merger agreement. Prior to this, all discussions of valuation had taken place between E*Trade's investment bankers, BancBoston's Robertson Stephens, and Telebanc's team from Goldman Sachs.
The process began with phone calls between the principals. The first was from Bevilacqua to Caplan. A few hours later, discussions concluded with a conversation between Cotsakos and Caplan. A price was agreed upon -- 2.1 million E*Trade shares, worth some $1.8 billion at the time.
Now that the deal had achieved critical mass, many of Bevilacqua's team members left for home that evening. With the exception of the marketing and PR people, most of the people who stayed behind were lawyers who began negotiating the terms of the deal. At dinner, Bevilacqua ate with members of the Telebanc team. Then it was back to more negotiations. Then another midnight conference call to the West Coast. And bed, once again, by 2 AM or 3 AM.
The negotiations went on until late afternoon both Saturday and Sunday. With the lawyers deadlocked on the final outstanding issues, it was time for Bevilacqua and Caplan to come in and finish the deal. "Telebanc's CEO and I went into a room, sat down, went through the issues, and resolved each of them in a way that was reasonable and fair to both our shareholders and Telebanc's shareholders," Bevilacqua says. "That told me a lot about him in that he was able to sit down and make intelligent decisions quickly, on the spot, and without an army of advisers. It was a very practical approach, and we wound up with a terrific deal."
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