As experts in Technology M&A, we were asked by leading online IT magazine IT Pro to comment on HP’s US$8.8bn write down of its purchase of Autonomy:
Daniel Domberger, Partner at Livingstone, said HP’s decision to go public about its suspicions of financial misbehaviour at Autonomy was bold.
“There’s a fine line between presenting information in the best light and seeking to mislead…but the difficulty in proving it and the time it takes could be a useful smokescreen,” he told IT Pro.
“In August, HP wrote off $8 billion of its $14 billion 2008 acquisition of EDS. Two huge writedowns in three months doesn’t feel like a coincidence, but everyone’s talking about the [one that involves an] alleged fraud instead.”
There is a chance the companies that advised HP and Autonomy on the deal could face legal action for not picking up on the alleged financial issues, he claimed.
“Deloitte and KPMG [HP’s auditors] could only work with the information they were given by Autonomy, but their role is to ask difficult questions and to identify whether it actually stacks up, and they apparently didn’t identify any red flags,” said Domberger.
“Autonomy’s advisers may also be at risk, but [could] disclaim any liability because they were passing on information provided by their client, without really taking responsibility for it.”
If it emerges that fraud did take place, this means HP’s advisory teams will have been misled by Autonomy, and may not be liable, he added.
But, if no deception took place, they could find themselves in the firing line for not finding fault with the company’s finances and – in turn – exposing their client to risk.
“Neither situation is great for their reputations, and I think a number of compliance officers will be digging through their files, trying to assess their exposure,” he concluded.