In this assignment, you are provided with a case study of HP and you are supposed to follow instructions. Format your paper in APA style, and cite at least 6 sources. The length of the paper should be at least 8 pages.
The specific analysis questions are listed below this general description. Your analysis must address all the questions and offer logical recommendations, which will lead the focal company to a sustainable competitive advantage. Do not do additional outside research; everything you need is in the case.
Using course concepts on business level and corporate strategy (especially mergers and acquisitions), game theory and competitive dynamics, analyze HP’s acquisition of Autonomy and the potential for this strategic change to lead to a sustainable competitive advantage for HP.
Address the following questions in your write-up:
- Briefly assess HP’s corporate strategy and Autonomy’s corporate strategy and their performance. What are the strategic motivations for HP’s acquisition of Autonomy? Include specific synergies that you believe HP could reasonably expect from the acquisition.
- Based on the firms’ market values on August 17, 2011 and the final offer price, how much value must these synergies create in order for HP’s shareholders to break even? Was the $11 billion price tag justifiable at the time? Why or why not?
- Perform your own valuation of Autonomy (with and without any synergies) in 2011. Based on your analysis, if you had been a board member at HP what would you have been willing to pay for Autonomy? Why? Use Porter’s three tests to justify your answer. Include at least 3 scenarios in your analysis (use financial and qualitative data to support the scenarios).
Assumptions and Notes:
- The merger will not affect the firms’ level of working capital
- The average exchange rate is £0.647=US$1.00
- The synergies will grow at 4% annually past 2016
- The estimated market (equity) risk premium for the UK market from 1977-2012 is 3.5% and for the US it is 4.5%
- The corporate tax rate = 35%
- HP’s share price at the close on August 17, 2011 was $31.39 with 2.002 billion shares outstanding
- Conduct a high-level industry analysis as necessary- a detailed level 1 analysis is not required for this assignment.