Musings On Markets

Musings On Markets

It was disproportionately large: While there have been larger write offs of acquisition errors , this one stands out because it portions to approximately 80% of the original price paid. 5 billion of the 8.8 billion) was due to accounting improprieties (a polite phrase for fraud) at Autonomy. The marketplace was amazed: Most acquisition write offs, which take the proper execution of impairments of goodwill, are non-news because they lag the marketplace and have no cashflow effects.

In other words, by enough time accountants bypass to admitting a blunder from an acquisition, marketplaces have already accepted the mistake and moved on. 3 billion (12%) on the announcement. 5.8 billion into the value already and was surprised by the difference. I am sure that this case will be examined and reexamined over time in books like this one, but at this moment, every one mixed up in merger is blaming another person for the fiasco.

Meg Whitman, the current CEO of HP, blamed the last top management at the business, and said that “(t)he two people that should have been held responsible are gone “. Leo Apotheker, the last CEO who orchestrated the acquisition, claimed to be surprised at the “accounting improprieties” at Autonomy. Michael Lynch, the founder of Autonomy, said that two major auditors experienced performed “due diligence” on the financial statements and acquired found no improprieties at the business. Deloitte LLP, the auditor for Autonomy, refused all understanding of accounting misrepresentations and claimed to be cooperating with authorities.

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The advisers on the offer (Perella Weinberg & Barclay’s Capital for HP, Quatalyst, UBS, Goldman Sachs, Chase & BofA for Autonomy) have all been mysteriously silent, though none of them have offered a refund of their advisory fees. Before we go through the true figures, it will probably be worth reviewing the past background of both companies involved. On August 18, 2011, HP’s then CEO, Leo Apotheker (who had worked at SAP) announced his intent to escape the PC business and expand the enterprise technology business by buying Autonomy. As the deal making began on his watch, the real deal was officially completed on October 3, 2011, with Meg Whitman as CEO.

One of the perils of assessing “big” merger deals would be that the fog of offer making, made up of hyperbole, buzzwords and general uncertainty, obscures the facts. 4.6 billion for Autonomy. 2,533 million to the original book value of equity. 1.3 billion over post-deal publication value): Even if accountants article the value of assets in place to fair value, marketplaces may still attach a premium for development potential and future ventures. Much like any market number, this true number can be wrong, too high for some companies and too low for others. 1.3 billion more than the post-deal accounting book value of equity.

Autonomy) can take that cannot have been used by the companies independently and/or (iii) that Autonomy was terribly run which changing the way it was run will make it more valuable, i.e., there is a control premium. Even without the benefit of hindsight, neither undervaluation nor the control premium seemed to fit as motives in this acquisition.