The merger of hewlett packard and compaq a strategy and valuation

Macalester studied the analysis provided by her associate, including a history of monthly stock prices Exhibit 10capital-markets cost-of-debt data Exhibits 11 and 12and the Value Line tear sheets for both HP and Compaq Exhibits 13 and This requires constant change of strategies and product lines to focus on areas where demand is most concentrated.

Hewlett succeeded in creating a very public public-relations battle that sought to sway the opinions of shareholders, analysts, and industry observers, and as Hewlett managed to keep the HP-Compaq merger controversy at the forefront of coverage by business-news reporters and Wall Street analysts, other high-profile dissenters entered the fray.

She jotted down the following questions as she pored over the materials spread across her desk: 1.

Why compaq failed?

Fulmer, Philip A. Considering the traditionally poor response rate of individual shareholders and the fact that institutional shareholders controlled 57 percent of HP voting rights, the contest hinged on the decisions of these institutional investors. HWP Percentage Change But in high technology, no company has ever attempted this trade-off and come out ahead. The merger was termed a merger of equals, HP and Compaq had different strengths in their lines of business and the combination would provide a complementary set of products and services so as to serve the customers better. The market certainly seemed to be agreeing with Walter Hewlett see Exhibit 2. Accordingly, Macalester had instructed her research associate to provide background material on the merger, an assessment of the strategic value, and various valuation analyses to assist Macalester in evaluating the merger. Buchanan, under the supervision of Robert F. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. The main opposition from Hewlett came in contending that management has underestimated the revenue losses of Compaq and the proposed synergy will not materialize owing to integration debacles and highly different cultures of the two firm. Hewlett succeeded in creating a very public public-relations battle that sought to sway the opinions of shareholders, analysts, and industry observers, and as Hewlett managed to keep the HP-Compaq merger controversy at the forefront of coverage by business-news reporters and Wall Street analysts, other high-profile dissenters entered the fray. Furthermore, with customers looking to maintain strong relationships with fewer technology vendors, the merger better positioned the new company to provide its clientele with a wider spectrum of products and services. Was the merger strategy sound? Hewlett on November 16,

In response, HP shares, which were still lower than their announcement-day levels, closed up Although direct distribution had helped lower its costs, Access still operated at a negative margin. At the dawning of the new millennium, however, changes were afoot at HP.

hp compaq merger cultural issues

Macalester picked up the proxy report and reviewed the section on synergies valuation see Exhibit 9. In gaining and retaining technology customers by viewing them as the business clients they ultimately were, IBM Global Services really had no other single solutions competitor in the highly fragmented IT-services sector.

Over the following months leading up to the proxy vote, Hewlett amended his initial information filing with the SEC numerous times by providing hundreds of pages of documentation supporting his claim that the merger rationale was flawed.

Hp failed acquisitions

The market certainly seemed to be agreeing with Walter Hewlett see Exhibit 2. New York: HarperBusiness, , Dell was achieving significant profit owning to lower costs and this was putting huge cost pressure on HP. Markets did not see any rationality in the merger and found the deal to be extremely difficult to make the promised synergy. UVA-F v. Need to attack the enterprise market more aggressively which was seen as the primary engine for value creation. Hewlett on November 16, Suddenly, a decision that seemed rational and straightforward—pursue a growth opportunity—became a strategic imperative for the entire company. All rights reserved.

On March 14,the Thursday before the Tuesday, March 19,shareholder vote, Macalester began her review of the materials provided by her associate.

Suddenly, a decision that seemed rational and straightforward—pursue a growth opportunity—became a strategic imperative for the entire company. Valuation multiples for comparable companies, as well as recent comparable transactions, were broadly distributed owing to the uncertain but largely negative outlook for the tech sector specifically and the economy overall see Exhibits 4, 5, and 6.

If customers were going to look to an integrator to help them envision, design, and build end-to-end solutions, then the companies playing that role would exert tremendous influence over the full range of technology decisions—from architecture and applications to hardware and software choices.

It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation.

The merger of hewlett packard and compaq a strategy and valuation

On December 7, the Packard Foundation, which controlled 10 percent of outstanding HP shares and was the single largest HP shareholder, decided to oppose the merger. At the dawning of the new millennium, however, changes were afoot at HP. Hewlett succeeded in creating a very public public-relations battle that sought to sway the opinions of shareholders, analysts, and industry observers, and as Hewlett managed to keep the HP-Compaq merger controversy at the forefront of coverage by business-news reporters and Wall Street analysts, other high-profile dissenters entered the fray. Over the following months leading up to the proxy vote, Hewlett amended his initial information filing with the SEC numerous times by providing hundreds of pages of documentation supporting his claim that the merger rationale was flawed. By June 29, , HP and Compaq had executed a confidentiality agreement, and the companies commenced mutual business-duediligence investigations. Apple Computer Inc By merging, the newly combined companies would be a major force in enterprise computing and perhaps among the top three in services. Need to attack the enterprise market more aggressively which was seen as the primary engine for value creation. We wanted to be the next IBM. What would a SWOT analysis reveal? Although HP was the market leader in imaging and printing, its computing and ITservices businesses noticeably lagged the competition, and the company did not have an organic growth strategy for these businesses. Both boards unanimously approved and executed the merger agreement, effective September 4, The merger was termed a merger of equals, HP and Compaq had different strengths in their lines of business and the combination would provide a complementary set of products and services so as to serve the customers better.
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the Merger of Hp and Compaq