HP Acquisition of Autonomy Harvard Case Solution & Analysis

Do you think Autonomy is a good fit to HP? Why or why not?

 The business model of Autonomy is different from HP.Autonomy is a British firm and operates in structure and unstructured data management for the corporate clients. On the other hand, HP is spread among six segments. The main difference is that Autonomy is not a good fit for HP because there are many difference in the both of the companies. One difference is the business model, HP’s operation is different from Autonomy,and therefore, there is integration of business model problem. Secondly, HP is an American company while Autonomy is a British company, both company and country’s culture is different therefore, there is also difference of corporate culture.The management styles of both companies are also different from each other. The corporate strategy is also different. HP was founded and operates in the USA while Autonomyis basically British originated firm and mainly operates in the UK, therefore, there is difference in market. The UK market is different from the USA market and the change of region requires skill and expertise of that particular region. These all factors conclude that Autonomy is not a good fit for HP.

Comment on Autonomy’s financial performance before the acquisition. What do you conclude?

Before the acquisition, Autonomy was earning $870 million in revenues and $217 in profits and higher operating profit margin than other industry players.IT industry margins income to sales was 11%, while only two companies were earning significantly higher than industry averages such as FleetCor Technologies and NetStar technologies.Autonomy has grown organically and inorganically. Autonomy has acquired number of companies to grow inorganically.Autonomy has tempered its accounting figures through the creative accounting to look more attractive for the purpose of acquisition.

If you are on the board of HP, would you approve this acquisition? Why or why not?

Acquisition would not be approved if I place myself at the board of HP. There are many reasons for not approving the proposed acquisition. Firstly, the price which is being paid is too high. A premium of 64% is being offered above previous closing price of the share. Share can be valued using different valuation model, which is discount cash flow.

HP Acquisition of Autonomy Case Solution

By using DCF method, thevalue of Autonomy is $14.95 or GBP 9.35. Rate assumptions are used into the valuation method which is sensitive to valuation. Exchange rate also plays an important role in the valuation of the Autonomy. Apart from the valuation of Autonomy, other benefits are also considered such as expected synergy. The maximum amount paid is expected fair value of Autonomy plus expected synergy and a premium between 5 to 10% which is normal.

Therefore, on the basis of the above fact; as a member of board, I will not allow the approval of the acquisition...............

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