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Unformatted text preview: or use by Xiaolei Cong, from 11/30/2012 to 2/28/2013, in the course:
MGMT 237: 001 Management of Technology - Chaudhuri (Spring 2013), University of Pennsylvania.
Any unauthorized use or reproduction of this document is strictly prohibited. HP and Compaq Combined: In Search of Scale and Scope, SM-130 p. 9 boards together in a friendly way, can you bring the CEOs together in a friendly
way? Any of these things could still have killed the deal. But we got through all
of those and then you get down to the final issue here of what do you pay—
which to a finance guy is critically important.
A Bruising Proxy Battle
The conventional wisdom before the HP-Compaq deal was that large mergers of technology
companies do not work. Indeed the chairman of Compaq, Ben Rosen, said about AT&T’s
acquisition of NCR in 1991: “The main beneficiaries of mergers in the computer industry have
been competitors, because companies become so focused on organizational matters that they lose
sight of their customers.”15 That acquisition, like so many others in technology, turned out poorly
and destroyed billions of dollars of value for AT&T shareholders. Before HP could embark on its
vision to gain scope and scale by acquiring Compaq, it had to convince its shareholders to
support the deal. This was made difficult, and the merger was very nearly scuttled by the proxy
fight waged by Walter Hewlett, an HP board member and son of co-founder William Hewlett.
Walter Hewlett and the trusts of the families of both founders (which controlled large blocks of
HP shares) were against the merger and spent heavily to try and persuade other shareholders to
vote against it. (See Exhibit 2 for selected data that was cited by Hewlett in opposition to the
merger and by HP in support of the merger.)
Walter Hewlett and the others opposing the merger boiled down their position to four major
1. 2. 3. 15
16 Resulting business portfolio is worse than the existing HP portfolio:
a. Larger PC position will increase risk and cash drain.
b. Contrary to earlier professed s...
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