Few big takeovers in recent years have received quite as harsh a reception as that accorded Hewlett-Packard’s $11bn bid for the British software developer, Autonomy. Not only did the US technology group’s shares crash on announcement; angry investors later forced out the chief executive responsible, Léo Apotheker.
Now, just over a year later, it is clear how right the market was to be worried. HP has written down nearly $9bn – or 80 per cent of the purchase price. It alleges that a big chunk of these impairments are the result of Autonomy’s “accounting irregularities, misrepresentations and disclosure failures”. While HP still believes in Autonomy’s technology, the company’s margins – long a source of wonder in the software industry – are lower than it thought.
The responsibility for the failings identified in HP’s somewhat belated independent due-diligence review (itself triggered by an internal whistleblower) has yet to be established. Autonomy’s former boss, Mike Lynch, has denied any wrongdoing. But the sheer size of the gap in value makes it hard to credit this purely to Mr Apotheker’s credulity – or HP’s subsequent mismanagement.