Merger & Acquisitions Perspective Learning, EPGDIB 2013, Gr.

HP-COMPAQ MERGER

CASE STUDY ON HP-COMPAQ MERGER

Published by ACRC, Univ. of Hongkong in 2006

Focus on HP-Compaq Merger of 2002

Revenue Growth Post Merger Not Commensurate With Returns Expectations

Severity Of Poor Performance Lead To Firing Of None Less Than The CEO
The Debate Is On Reason For Debacle, i.e

The Strategy Of Merger, OR

The Poor Execution Of The Merger

CASE STUDY ON HP-COMPAQ MERGER

HISTORY

MERGER PROS AND CONS

IMPACT OF MERGER THE NEW HP THE CHALLENGES AHEAD THE FUTURE STRATEGY

CONCLUSION GROUP NO.5s PERSPECTIVE

HP : HISTORY

Founded in 1939. Evolved From Scientific Products To A Wide Portfolio of Products and Services First Scientific Computer in 1966, First Business Computer in 1970s and First PC in 1980. Fastest Growing By 1997 And Ranked 4th Globally. By 2001 Reached 2nd Rank After IBM. Significant Player In Computer Industry, But Undisputed Leader Of Printing Industry An Annuity Like Business With High Margins Carleton Fiorina Took Over As CEO in 1999. Consolidated 83 BUs Into 17 Units Under 4 Divisions. Suggestion of Mckinsey & Co. In May 2001 For Strategy Licensing Deal With Compaq Converted Into A Merger.

COMPAQ: HISTORY

Founded in 1982, It Surpassed IBM in 1994 As Worlds Largest Manufacturer Of PCs. Growth Characterised By History Of Big Acquisitions.

Tandem Computers In 1997 DEC In 1998

Third Largest In2001, Behind IBM And HP

Facing Intense Competitive Pressure In Core PC Business Since 1998

Integration Woes Increasingly Contributing To Explicit & Hidden Costs.

Suggestion For Merger Rather Than Strategic Licensing Deal Was Of Michael Capellas, Compaq CEO and ExCEO of HP.

HP-COMPAQ MERGER : PROS

Economies Of Scale To Generate Cost Savings Leverage Compaqs Progress In Direct Sales Ability To Provide Integrated Solutions - Stronger Product Line For Servers Market, Market Leader In Storage Segment Stable Cash Flow From Stronger Services Business Cost Synergies - Streamlining Of Product Lines, Efficiency In Administration, Procurement, Marketing, HR. Cost Savings Leading To Greater Investment In Imaging And Printing Business. Possible Cross-Selling Avenues.

HP-COMPAQ MERGER : CONS

Increasingly Irrelevant PC Business Model Rather Than Scale Issues Existing Resource Mix Very Similar No Integration Benefits Or Change in Strategic Benefits Cost Synergies Overlaps Existed Only In PC and Server Product Lines. More Profitable Imaging And Printing Business CrossSubsiding Less Profitable Divisions Erosion Of Share Holder Value. Lack Of Proven Expertise To Handle Massive Integrations, Especially Technology Sector Diluted Management Focus

HP-COMPAQ MERGER : IMPACT

Increasingly Irrelevant PC Business Model Rather Than Scale Issues Existing Resource Mix Very Similar No Integration Benefits Or Change in Strategic Benefits Cost Synergies Overlaps Existed Only In PC and Server Product Lines. More Profitable Imaging And Printing Business CrossSubsiding Less Profitable Divisions Erosion Of Share Holder Value. Lack Of Proven Expertise To Handle Massive Integrations, Especially Technology Sector Diluted Management Focus