When Hewlett-Packard (HP) completed its takeover of Autonomy in 2011, who would’ve thought that four years later the two would still be locked in a bitter legal battle? If you don’t know why the US tech giant and one of the UK’s most successful start-ups are fighting, read our guide to the HP/Autonomy lawsuit…
In August 2011, HP sent shockwaves through the IT world with the £7 billion takeover of Autonomy Corporation. As the UK’s largest software company, Autonomy’s co-founders Mike Lynch and Richard Gaunt stood to make £566 million from the sale of the business – which was started in 1996 with a £2,000 loan.
With a premium of around 79% over market price, HP was widely criticised for what was seen as a ‘botched strategy shift’ and a ‘chaotic’ attempt to rapidly reposition itself away from manufacturing hardware towards cloud computing. And within a year, HP had perhaps unsurprisingly written £5.75 billion off the value of Autonomy.
HP attributed the hefty write-down to ‘serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy’ that occurred prior to the acquisition. As a result, they turned over the investigation to the U.S. Securities and Exchange Commission and in 2013 the Serious Fraud Office in the United Kingdom started to look into the allegations.
In 2014, events took another twist when Autonomy Chief Financial Officer Sushovan Hussain files a motion to block an HP shareholder agreement, claiming that the company was attempting a cover-up. In response, HP claimed that Hussain ‘was one of the chief architects of the massive fraud on HP that precipitated this litigation.’
The settlement case continued into 2015 after an agreement that was initially reached in June 2014 was then rejected by the US District Court for Northern California. In the UK, the case against HP was dropped as a lack of evidence made it too hard to get a prosecution.
At the end of March this year, the former management of Autonomy announced it will file claims against HP for loss and damage caused by false and negligent statements made against them. Former Autonomy CEO Mike Lynch’s claim, which is likely to be in excess of £100 million, will be filed in the UK.
So what was HP’s response? Well, they claimed that Autonomy’s actions were in direct response to HP filing a case against Lynch and Hussain for £3.4 billion worth of damages – just one day earlier.
As we eagerly await the next round in litigation that will probably only get uglier as the case continues, we can only wait and see what is next for this bitter ongoing dispute…