HP Compaq acquisition - the long term results
Conventional wisdom says that big company acquisitions of other big companies are bad. There are certainly plenty of examples that failed to live up to expectations. However, just because some fail does not mean that all will fail.
In 2001, HP’s then-CEO Carly Fiorina proposed that HP acquire Compaq. Fiorina argued that the two computer giants had complementary strengths which, if combined, would enable the merged entity to do even greater things. The proposal met vociferous opposition on all sides - commentators, competitors and major shareholders. Even after the proposal was finally approved, the merger was held to be a folly, evidenced by defections of key people and customers, and 3 years of poor results. Fiorina eventually had to go. But was her strategy wrong?
Writing in The Huffington Post, Ben Rosen analyses the deal 6 years on. He is a former chairman of Compaq, who retired from that role a year before the deal was proposed; so he’s informed, but independent. Rosen hails the “merger” as a great strategic success, but opines that Fiorina lacked the skills to manage the much larger post-acquisition business. A change of leadership brought those skills in. Under Mark Hurd, the combined HP/Compaq business was able to harness its potential and deliver outstanding success:
Today, the merger is nearly six years old. And, surprise, surprise — it’s turned out to be a sensational combination, whether measured by market share, market leadership or increased shareholder value.
The share price chart says it all. 6 years on, and despite those 3 poor years, the strategy looks to have been vindicated. The lessons: even the best strategy needs great execution, and poor execution doesn’t mean the strategy was wrong.
May 19th, 2008 at 2:00 pm
pre & post result of H P & Compac acquisition