I’ve been following the legal battle between HP and Autonomy and after reading the SFGate.com article, “Hewlett-Packard source says Autonomy sales contracts a major mess,” the key questions that popped into my mind were, “Where were all of the contracts? Which contracts were missing? And more importantly, how could such error-riddled and completely missing contracts go undetected?” Unfortunately, most organizations lack comprehensive contract visibility of their own contracts, let alone those of an acquired entity, leaving themselves unaware and exposed to hidden risks and unable to capitalize on latent opportunities. So, what could HP have done differently to address these questions? And what can your organization do to better assess the value of a planned merger or acquisition?
There are three key takeaways that can be learned from HP’s Acquisition of Autonomy:
1. Maximize contract visibility – Locate, identify and assess the contracts that are being acquired as they can make or break an M&A transaction.
For HP, missing contracts and hidden terms played a huge role in this dispute. Aside from having full visibility to its contract portfolio, it would have also been beneficial for HP to know what was in each contract and what was missing from them. With advanced technology, like Seal Software’s Contract Discovery and Analytics, organizations benefit from a fast, economical and automated process to find their contracts wherever they reside, as well as identify and isolate relevant specific contract language.
2. Be equipped – Have the right solution to facilitate due diligence. HP had all the advisors for an M&A transaction, but didn’t know what contracts needed attention and where focus was needed in the extremely limited time.
While no one knows for sure what HP really knew, when they knew it, and if knowing it would have changed the decision they made, but they at least could’ve been much more informed throughout the process if they’d had the kind of visibility to the unstructured contractual data that technology, like Seal Software, can provide to due diligence teams.
3. Don’t rush – Due diligence does not need to be rushed under market pressure if the right combination of technology and people are in place. By implementing the right combination of technology and people needed to proactively review acquired contracts, more thorough due diligence can be done in a fraction of the time.
A new CEO was trying to prove himself and provide quick value to shareholders. Time is always tight in these transactions, but it was probably tighter than it would have been because HP’s stock had recently taken a dive. With the power of technology like Seal Software, an enormous amount of information can be sifted through in very compressed timeframes.
For any organization approaching a merger or acquisition, whether on the buy or sell side, gaining immediate insight to the hidden risks and liabilities buried within unstructured contractual documents and understanding which critical contractual documents themselves were missing during the due diligence process is essential. Equally important, the post-merger integration process demands flexible, agile visibility across both parties’ contracts as conflicts can suddenly arise that create new risks (on the negative side), yet they may also create potential cost savings and revenue opportunities (on the positive side).