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Hewlett-Packard CompaqMerger
Business Decision MakingSpring 2005
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Wh at W e Hoped to Learn
Basic M&A criteriaHow th e AHP process really works
Wh at h appened wit h HP & Compaq andh ow can we make it better in t h e future?
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O utline
I. Organizational StructureII. Introduction
III. CriteriaIV. AlternativesV. Hierarc h yVI. Conclusion
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O rganizational StructureCOOR DINATOR
Shannon Caputo
ALTE R NATIVES C R ITER IA EXPER TS W R ITER SSteve Piskadlo Phil Laspisa Evan Taylor Melissa ShahPaul Ferraro Kat h leen Cardelli -Presentations Jonat h an Lai
S h awn Standen C h ris Skorski Chris Skorski Cassie Knox -Expert C h oice
DO MAIN EXPER TS:
Dr. Stephen Andriole
Professor John Toppel
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O utline
I. O rganizational Structure
II. Introduction
III. CriteriaIV. AlternativesV. Hierarc h yVI. Conclusion
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Introduction to HP
W ell-respected systems vendor Smaller, but wort h y competitor to IBM
Competes mainly in t h e h ardwarebusiness wit h desktops and serversLacking in th e services business
Undisputed leader wit h its line of PCprinters
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Introduction to Compaq
Compaq sales leveled off wit h addedcompetition from Dell
Compaq was best known for its personalcomputer offeringsAfter paying $5.4 billion to finance amerger wit h Digital Equipment, Compaqeliminated overlap by cutting t h ousands of
jobs worldwide
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Carly Fiorina: Mike Capellas:
C.E. O . of Hewlett-Packard C.E. O . of Compaq
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Wh y Merge?
To compete wit h IBM and ot h er companies
Th e combined services business will h ave65,000 services professionals vs. 100,000-plus for IBMR educe CostsBolster stock
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Merger Dates
September 4, 2001 - HP and Compaqannounced a definitive merger agreementto create an $87 billion global tec h nologyleader.Eigh ts mont h s later on May 3, 2002 HPand Compaq officially merge.
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Wh at HP Has to Say on Wh y
Because in one strategic move, we will become market leaders in servers, in storageand in management software -- t h e essentials of business infrastructure, w h ereleaders h ip really counts.Because we will greatly strengt h en our dept h and breadt h of tec h nology solutions at a
time w h en customers demand integrated, end-to-end solutions.
B ecause more inventors and engineers will befocused on solving the toughest technology challenges of our times -- together.Because combined we will lead t h e marc h toward open standards more effectively
th an eit h er company could on its own.Because for our employees, customers and s h areowners, we will be a stronger, more
vibrant HP, better conformed to lead and grow under market conditions t h at willdemand unprecedented integration, breadt h and flexibility.
B ecause in our industry, to stand still is to fall behind.
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O utline
I. O rganizational StructureII. Introduction
III. CriteriaIV. AlternativesV. Hierarc h y
VI. Conclusion
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Main Criteria
Ability to ImproveFinancial PerformanceAbility to EvolveCompany
Ability to Integrate
Ability to Improve Financial Con ition
Ability to Evolve Company
Ability to Integrate
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Financial Implicationsi
Goal: Should HP and Compaq Merge? Ability to Improve Financial Conditions (L: .460 G: .460
Ability to Decrease Costs (L: .643 G: .296) Ability to Increase Sales (L: .357 G: .164)
PC Technology (L: .422 G: .069)
Server Technology (L: .228 G: .038)Service Technology (L: .210 G: .034)Printer Technology (L: .140 G: .023)
Ability to Evolve Company (L: .358 G: .358)Increase Intellectual Property (L: .600 G: .215)
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Ability to Evolve Company
. .Server Technology (L: .228 G: .038)Service Technology (L: .210 G: .034)Printer Technology (L: .140 G: .023)
Ability to Evolve Company (L: .358 G: .358)
Increase Intellectual Property (L: .600 G: .215)Improving Brand Value (L: .400 G: .143)
Image (L: .396 G: .057)
Awareness (L: .366 G: .052)Loyalty (L: .238 G: .034)
Ability to Integrate (L: .182 G: .182)Human Capital Management (L: .364 G: .066)
I I ll l P (L 600 G 215)
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Ability to Integrate
Increase Intellectual Property (L: .600 G: .215)Improving Brand Value (L: .400 G: .143)
Image (L: .396 G: .057) Awareness (L: .366 G: .052)
Loyalty (L: .238 G: .034) Ability to Integrate (L: .182 G: .182)
Human Capital Management (L: .364 G: .066)Employees/Culture (L: .667 G: .044)Channel Partners (L: .333 G: .022)
Company Organizational Structure (L: .251 G: .046)Resources (L: .222 G: .040)
Technology (L: .337 G: .014)Marketing (Brand) (L: .268 G: .011)
IT Infrastructure (L: .235 G: .009)Relationships with Customers & Suppliers (L: .161 G: .007)
Future Planning (L: .163 G: .030)Strategy (L: .750 G: .022)Tactics (L: .250 G: .007)
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O utline
I. O rganizational StructureII. Introduction
III. CriteriaIV. AlternativesV. Hierarc h y
VI. Conclusion
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Alternatives
Sh ould t h ey Merge? YESSh ould t h ey Not Merge? N O
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O utline
I. O rganizational StructureII. Introduction
III. CriteriaIV. Alternatives
V. Hierarchy VI. Conclusion
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Ex pert Choice
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O utline
I. O rganizational StructureII. Introduction
III. CriteriaIV. AlternativesV. Hierarc h y
VI. Analysis & RecommendationsVII. Conclusion
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R esults
NO 53.4% YES 46.6%
Based on t h e M&Acriteria recommended
by our domainexperts, HP andCompaq s h ould noth ave merged
%
%
%
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%
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o es
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Sensitivity AnalysisTo c h ange t h e final outcome
Ability to Improve Financial Performance must
increase from 46.6 to 55.7 or a 19 .5% ch angeAbility to Evolve Company must decrease from35.8 to 27.8 or a -22.3% ch angeAbility to Integrate does not affect t h e decision
O verall, t h e final answer is not very sensitive toany of t h e criteria
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O utline
I. O rganizational StructureII. Introduction
III. CriteriaIV. AlternativesV. Hierarc h y
VI. Analysis & R ecommendationsVII. Conclusion
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Wh at Happened?
Th ey did manage to save $3 billion wit h th e merger, successfully accomplis h ingth eir main goal of reducing costs of $2.1billionHowever, t h at came at t h e price of firing44,000 employees over t h e last 3 years O riginal estimate: 15,000-17,000
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Conclusions
Based on t h e criteriath e HP and Compaq
merger s h ould noth ave gone t h roug h .
Problems wit h integration as well asevolving t h e company
can be forecastedth roug h th e AHPprocess we h ave
s h own h ere today.
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Mark Hurd: HPs New C.E. O .
Mark Hurd, a former president at NC R corporation,wh ere h e spent 25 years; was appointed C.E. O . andpresident of Hewlett-Packard on Marc h 29, 2005.
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Th ank You!
Questions?