Monitored Alarm Systems

Lots to do in the recent Wall Street Journal

story about how Hewlett-Packard "missed an opportunity to get away" from the acquisition of autonomy - HP now believe that a lot of revenue recognition fraud and took millions and millions of dollars of write-downs - but this description of the process of approval of the Board of the case is all you need to know the following:

• HP ?? _{administration and autonomy Bankers calculate how much money is necessary to add 10 years to justify the price. Autonomy trajectory will not be achieved. The agreement requires making more revenue growth as a result of the alliance assumed HP acquisition, people familiar with the matter. But managers believed they could make the numbers.}
• Calculations are performed without knowledge of the alleged fraud, but who cares? Here, roughly, the thought processes of HP:
• Applications
• price for independence is X

Autonomy _{DCF is the value of Y} based on revenue growth expected, but no synergies

Well, but the value is Y DCF

synergies with aggression regular

Good, but ... although we could do another number Y

> = X looks good.

If you notice that the current figures are composed of income, while changes Y

but Y

not an AND input

- the real value is that HP Autonomy - because that number was also do

"Synergies" was just an outlet for the equilibrium equation. Mathematics bankers in the logbook to approve the agreement was only to be soothing - Administration get nervous

if they can watch a football slideshow while approving a purchase - not affect the result. HP may be assumed to have rejected the offer had he known the income situation of the truth autonomy, because valuation numbers would not work, but it is an absurd hypothesis, because even using false

• benefits did not work and did not reject the agreement.

It is too simplistic - much worse do anything for a bit, "oh you're such a massive fraud" is an excellent point to make in the negotiation of the sale price - but I which is the correct analysis. Usha Rodrigues wrote: "The die is cast in the acquisition of autonomy which the Council took Apotheker HP CEO" involved in an acquisition impact. "When you have a CEO who really wants to make a deal, and you really want to make an agreement, it is difficult to imagine that any accountant who came to him with something less boring technical subtlety that "this is phantom income" would cause more problems - for example, a banker who came to him with something less boring technical finesse. " the price paid is more than the cash flows of the asset for you, "Shut up, nerds important CEO We do business here


What do you think of this issue of the social value of M & A? More or less the same as you always feel? Some deals are good and some are bad, and CEOs tend to prefer acquisitions, since acquisitions optimistic and feel like getting married, and joints must try to close the acquisitions that are bad for shareholders, but sometimes do not not by country, everyone knew that already clubs etc, this is anecdotal confirmation pleasant, but, after all, only anecdotal. I'm sure the current CEO of HP, never make an acquisition that could destroy shareholder value. reasonable and promising medium-term success as an investment banker is to tell customers what they want to hear. This is a good thing, because then guests will find pleasant to be around, but it is also good because they want to hear So there is often a synergy there, "oh yes, you must do this operation involves the payment of investment banking.. "CEO, after all, tend to (1) wants to act, (2) wants to do great things, and (3) have a high degree of confidence in their ability to make investment decisions. If these decisions are systematically biased towards the destruction of shareholder value ... Well, I mean, I do not work here, you know?
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