This appears to have been a willful effort on behalf of certain former Autonomy employees to inflate the underlying financial metrics of the company in order to mislead investors and potential buyers. These misrepresentations and lack of disclosure severely impacted HP management’s ability to fairly value Autonomy at the time of the deal.
HP has referred this matter to the US Securities and Exchange Commission’s Enforcement Division and the UK’s Serious Fraud Office for civil and criminal investigation. In addition, HP is preparing to seek redress against various parties in the appropriate civil courts to recoup what it can for its shareholders. The company intends to aggressively pursue this matter in the months to come.
I was shocked when HP paid $12 billion for a software company I'd never heard of. But then, there are lots of software companies I've never heard of, and 30-person companies get sold for nearly a billion dollars nowadays, so what do I know?
I guess I don't understand the due diligence process very well, but in the cases I've been (somewhat) involved in, it's hard to see how the acquiree can hide much of anything. The acquiring company generally gets access to everything, for as long as they want. So did HP (a) rush the process? (b) not assign a very good team of examiners? (c) actually have the information at the time but disregard it? or (d) find themselves prevented from getting the information because Autonomy operated in a different country, under different rules?
It sounds like they think they can get some of their money back, but I think this is mostly about ethics in business.
This is a very interesting development.