Hewlett-Packard and shareholders reach settlement in suit over Autonomy deal
PALO ALTO — In a victory for Hewlett-Packard, the tech giant said Monday it has tentatively reached a settlement in a federal shareholder lawsuit over its ill-fated purchase of British software company Autonomy …
Context & Ripple Effects
The Autonomy saga has run through three phases in the corpus: HP's November 2012 allegation of accounting fraud at the company it bought for billions (H-P Claims Fraud at Autonomy), then a February report that HP had begun exploring an end to the resulting shareholder lawsuit, and now Monday's tentative settlement. The timing lands days after HP also won dismissal of a separate suit tied to ex-CEO Mark Hurd's ouster (dismissal of the Hurd-linked lawsuit), giving the company back-to-back legal wins.
It is not HP's only shareholder payout of 2014 — Reuters reported an April agreement to pay $57 million in a shareholder settlement — but this one goes to the heart of the Autonomy write-down, the transaction that defined the Meg Whitman era's cleanup agenda. Pickup by CNET, Reuters and NASDAQ suggests the market read it as closing a chapter on the deal.
First-order effects
- Shareholder plaintiffs in the federal Autonomy suit move toward recovery under the tentative terms, while HP retires the largest open litigation exposure from its 2011 acquisition once court approval lands.
- Whitman's leadership gets a clean legal result on the deal she inherited, removing a recurring disclosure and distraction item from HP's quarterly narrative.
Second-order effects
- Coming on the heels of the Hurd-ouster dismissal, the settlement strengthens HP's hand in any remaining deal-related claims and gives directors negotiating leverage on indemnification and D&O questions.
- Insurers and advisors to large software takeovers gain a fresh settlement datapoint for pricing diligence failures, pushing premium and escrow costs onto future acquirers of audited-but-opaque targets.
Third-order effects
- If the pattern holds — mega-acquisition, write-down, multi-year shareholder suit, cash settlement — boards face structural pressure to price post-closing litigation risk into deal approvals and to demand deeper pre-close accounting scrutiny of acquired software businesses.
The trend: Major technology acquisitions are increasingly being litigated to negotiated shareholder settlements rather than resolved by the acquirer's original strategic rationale, making post-deal accountability a standing cost of M&A.