Hewlett-Packard–Compaq: The Merger Decision Harvard Case Solution & Analysis

3) Why did Walter Hewlett vote for the deal in the board room and vote against it as an investor?

Since, Hewlett believed that the investment would not be in favor of HP and its shareholders, therefore, he opposed the merger decision but after his discussion with Larry Sonsini, who was the legal consultant of HP, he realized that whether he votes against or in favor of the deal in board room, the merger will be initiated in both the cases, but the adverse result of his opposition in board room will weaken the negotiating position of HP in order to negotiate on acquisition price; which will ultimately lead to higher price being paid for acquisition., Therefore, Walter Hewlett, in the capacity of HP’s director, decided to vote in favor of the acquisition in the board room in order to protect HP’s interest in acquiring Compaq and secure a reasonable price for the acquisition to be finally approved by the shareholders.

On the other hand, Hewlett knew that the acquisition of Compaq would not be in the wider interest of HP’s existing shareholders because their investments’ exposure to unprofitable business of personal computers coupled with the diversion of management concentration from profitable business of printing and imaging to personal computer solutions. Moreover, HP would be exposed to the risk of integrating unwanted business units into their profitable business units; which will put the shareholders’ investment on risk. Therefore, Hewlett, in the capacity of investor, voted against the acquisition deal.

4) What is your assessment of the role played by third parties - consultants, investment bankers, analysts and institutional investors in this deal?
Experts felt that the blending was the best accessible choice regarding the merger of the two organizations that were battling to contend and referred to the proposed expense reserve funds as one of the essential profits. "There's colossal open door for collaborations," said Deutsche Banc Alex Brown expert George Elling, who anticipated that HP shares will be worth $40 if the organizations executed as planned. "Without this merger, HP wouldn't have the deals strength to rival Sun or IBM," included examiner John Jones of JB Ventures. Jones likewise noted that the tech goliath would have to face two money dairy animals. HP's $9 billion ink-cartridge business, in addition to a workstation repair business that was twofold of the span of HP. Hence, it would permit HP to finance more than $4 billion in R&D, which is quite higher than the finance that is being employed currently. Pundits of the arrangement included UBS Warburg investigators Don Young and Anthony Torna. Unyielding in their resistance, Young and Torna downsized both organizations from purchase to hold and lessened their 12-month value focus for HP from $37.50 to $18.00. "We dislike this arrangement," attested the investigators, including, "we don't find the vital reason of this merger to be attractive."Young and Torna imparted Hewlett's tension that the arrangement would weaken moguls' introduction to HP's productive imaging business while essentially expanding speculators' presentation to the PC business: "Our former positive perspective of HP was exclusively focused around the quality in the imaging business as we accept HP's server business is defectively situated and its PC business is late to embrace immediate distribution." They likewise addressed the vital profits of consolidating HP's and Compaq's administration organizations. "At the point when one takes a gander at the nature of administrations, the ugly support business overwhelms HP's [and Compaq's] blend while outsourcing/counseling/frameworks coordination overwhelms that of IBM. This is not an alternate IBM! This arrangement does not bring about HP turning into a stronger challenger to IBM in the venture space," closed Young and Torna. Undoubtedly, to turn into a stronger challenger, HP would likely need a take its position back after the merger. Resounding comparative estimations, J.P. Morgan H&Q investigator Daniel Kunstler remarked, "Hewlett Packard's and Compaq's legacy is in the processing business however they've lost their aggressive playing point and they need to get it once more through administrations. This objective is their channel dream.. In making better esteem for shareholders, they are better off if they do not finalize this deal." Pundits additionally addressed the danger that was involved in tackling Compaq's PC business................................

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