HP's Compaq Acquisition (B)

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Case Details:

Case Code : BSTA021
Case Length : 07 Pages
Period : 2000 - 2005
Organization : Hewlett-Packard (HP), Compaq
Pub Date : 2005
Teaching Note :Not Available
Countries : USA
Industry : Information Technology

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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In September 2001, Hewlett-Packard (HP) had announced it would acquire Compaq for $25 billion in stock. HP's CEO, Carly Fiorina (Fiorina) claimed that the new HP would become the global leader in servers, access devices (PCs and hand-held devices), and imaging and printing. Both firms were committed to the merger agreement early in the process1.

They fixed a breakup fee of $675 million should either side terminate the merger talks. Twenty-three teams were created solely to oversee integration. But the market reacted very unfavorably to the merger. On the first day of trading after the merger announcement on September 3 2001, HP's stock price plummeted by 18%.

The first challenge Fiorina had to deal with was opposition from the family of the founders...

Excerpts >>

1] According to documents filed with the U.S. Securities and Exchange Commission, either company could be forced to pay a $675 million breakup fee to the other if it is responsible for the failure of the multibillion-dollar deal. Specifically, one of the companies would be liable to pay the other if its shareholders were to fail to approve the deal, if its board were to change or withdraw approval of the deal, or if one of the two companies were to cause the deal to be delayed beyond May 30, 2002, or Aug. 30 under certain circumstances (Source: HP-Compaq: Breaking Up Is Hard To Do, CNET News, news.com.com, 6th September 2001.)


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