Hewlett Packard Compaq Harvard Case Solution & Analysis

INTRODUCTION

Hewlett Packard is a multinational company that is involved in the information technology. On the other hand, it is an American company and it’s headquarter is located in Palo Alto, California, US. Moreover, it is involved in providing in the technologies, products, the softwares as well as the services and solutions to the customers and the medium sized businesses.

In addition to this, this company came into existence in a one-car garage in Palo Alto. Despite this, in the fiscal year 2001 September HP entered into an agreement with Compaq Computer Corporation. Hence, in this agreement the company was going to make a purchase of all of the outstanding ordinary shares of Compaq. Moreover, the price that it was going to pay for it was almost 0.6325 shares of a common stock of HP for each share of the common stock in relation to Compaq.

However, it is also highly specialized in the manufacturing and development of data storage, computing, the designing software and hardware based upon networking. This also includes a wide range of imaging products and printing products.

Apart from this, Compaq being the first company in the market was able to produce some of the IBM compatible products in relation to PC.In addition to this, Compaq was founded in the fiscal year 1982, and it is involved in the development, selling of computers and other related services to computing.

PROBLEM STATEMENT

The reason behind the merger between HP and Compaq was to strengthen the strategic position of HP in a market in which it was marketing in order to become a market leader of the computing industry in order to conquer IBM. However, it is worth mentioning that the position of HP in the market is very weak in some of the key attractive segments and it is stuck in a critical situation between IBM at the higher end and between IBM at the lower end.Hence, previously the business was quite prosperous in the printing and imaging area, how ever it may go down now because of the less improvement in the PC business.

CASE ANALYSIS

First, in order to have a sound merger that is going to take place between HP and Compaq there is a need to evaluate the value of the targeted firm that is going to be acquired by the acquirer. Hence, the reason behind this is the base in relation to the transaction that is going to take place between these two companies.

Furthermore, this is also going to provide assistance in terms of making decision that whether the merger is going to be successful or not. Therefore, the value of the target company as per the graphs and charts that has made available in the available information the value of the acquiring company is $16 billion or $21 billion.

Hence, this range is going to act as a base in order to make a decision whether the merger is going to result in the favor of shareholders of both the companies and this is the most crucial step in relation to the analysis of a merger between these two companies.

Moreover, it may not be appropriate if the two companies are combined without taking into account the synergies that are attached to the merger. Therefore, as per the exhibits the analysis in relation to the synergy has been performed.

In addition to this, the synergy evaluation is based upon the merger between HP and Compaq. Hence, when the two businesses are combined with each other then it will result in the changes in the operating as well as the financial results.

Furthermore,the extra value that may be obtained after the combination of these two companies could not be achieved if the companies will be operating on an individual basis. However, the types of the synergies that exist are named as option synergy and the second one is the place synergy.Hewlett Packard Compaq Case Solution

Hence, before beginning the analysis that is based upon synergy there is a need to mention that a focus will have to be placed on the changes before tax for example, changes in the cost saving pre-tax as these are mentioned in this case. Thereafter, there is a need to make deductions of the payments related to tax from these cost savings...........................

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