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HP Says Duped Autonomy Acquisition Contributed To $8.8 Billion Write-Down

HP acquired Autonomy, a leading software maker internationally, back in 2011 for a whopping sum of $11.1 billion. Now, HP claims that Autonomy over-projected its sales deliberately before striking a deal with the company and thus HP ended up overpaying for the company. Founder of Autonomy, Michael Lynch, has denied the charge.


HP

Apparently, HP had one of the world’s leading accounting firms on the case who went through it before the company could ink down the deal. That only complicates the matters further. Both accounting firms, Deloitte and KPMG who were hired by the two companies to look into the deal approved it without discovering that anything was amiss.

Now, however, HP claims that Autonomy cooked up its accounting books and wrote down a lot of merely prospective sales as actual sales. This misrepresented the company’s sales value and duped HP into paying a whole lot more for it.

Ever since the acquisition, Autonomy’s sales haven’t been very good and HP had earlier cited that the company wasn’t performing as expected. Soon after the acquisition, Michael Lynch left HP for good. It was then that HP’s general counsel was approached by an anonymous Autonomy executive.

This executive revealed that Autonomy had been messing up the accounting books for nearly two years before the acquisition happened. And to substantiate this claim, he produced emails and other information. HP has alerted the U.S. Securities and Exchange Commission as well as U.K. Serious Fraud Office and is seeking an investigation into the alleged fraud claims against Autonomy.

Meanwhile, Mr. Lynch has completely rejected the allegations, stating, “We completely reject the allegations. I can’t understand how you can write down $9 billion of value and say somehow this was all caused by something you didn’t notice when you did due diligence with 300 people.”

Source: WSJ

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