Is there anything HP and Autonomy could have done differently to avoid the public backlash and share price drop the company suffered?
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Is there anything HP and Autonomy could have done differently to avoid the public backlash and share price drop the company suffered? |
Explanation
A thorough due diligence for an accurate valuation of company A was required to avoid a backlash. There would have been higher credibility and confidence that the acquisition was a good business decision for company H, i.e., it would create significant value in the near- and long-term.
If the average acquisition premium then was 20% to 30%, company H must have an irrefutable basis for offering 50%. When their CFO advised against the purchase, the CEO, chairman and board should have asked the CFO to explain her advice and support it with evidence.
If any reports about questionable accounting practices are raised by auditors and/or an executive of company A, these must be carefully investigated. As the popular saying goes, where there's smoke, there's fire. The management of company H is duty bound to make sure that the target company has reported their true value, performance, and potential in the long-term.
Postpone the acquisition and its announcement until after completion of thorough investigation. Reports of impropriety in company financials cannot be ignored.
The CEO, chairman, and board, must carefully study the financial analysis of the target company, demonstrating stronger stewardship of and accountability for company H's long-term value.
Establish strong governance corporate mechanisms to ensure transparency, ethical conduct, and vetting acquisition strategies. Such mechanisms can help make sure that the CEO, chairman, board, and management, debate the strategic logic and long-term value creation of any acquisition.
Sample Response
Both companies could have done a more thorough due diligence to ensure that a more accurate valuation of company A.
Company H must have an irrefutable basis for offering 50%. Management must seriously consider the CFO's advice against the purchase.
Reports about questionable accounting practices must be carefully and properly investigated.
Postpone the acquisition and its announcement until after completion of thorough investigation.
The CEO, chairman, and board must carefully study the financial analysis of the target company.
Establish strong corporate governance mechanisms to ensure transparency, ethical conduct, and vetting acquisition strategies.
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