Hewlett Packard Autonomy: Bank Issues Alleged

September 15, 2015

The Price of Silence on Wall Street” provides a bit of information about the role of intermediaries in the HP deal for Autonomy. I find it difficult to figure out if the bank was doing its normal sales job for a juicy deal or if the bank was doing some fancy dancing.

Here are portions of the write up I highlighted when I was out of Internet range in a far off land. There is some value to printing online article for offline reading.

Item 1:

He [a bank whistle blower] says he believes people need to know about certain acts related to Barclays’ role in Hewlett-Packard’s $11.1 billion acquisition of Autonomy, a British software company, in 2011. Barclays was a financial adviser to HP on the deal and the sole provider of a one-year, $8.3 billion loan to be used, in part, by HP to buy Autonomy. Since then, the Autonomy acquisition has generally been viewed as a disaster. In 2012, HP wrote down the value of Autonomy by $8.8 billion, and said that some $5 billion of it stemmed from a willful misrepresentation by Autonomy’s management of the company’s financial performance (Autonomy’s management disagreed, and the two sides headed to court).

Item 2:

Mr. Sivere [bank whistle blower] says he believes there is more to the HP story, in particular that Barclays may have breached its internal ethical walls regarding the deal, allowing some confidential information from the banking side of Barclays to be used by Barclays traders. He reached this conclusion in his role as a compliance officer and after he saw internal digital correspondence between the two groups that made him nervous that the wall had been breached. In 2013, Mr. Sivere tells me, he filed an internal report at Barclays that questioned the ethics and legality of what he had witnessed. He reported his concern that confidentiality had been breached around certain foreign-exchange trades; around so-called Contracts for Difference trades, known as C.F.D.s; and around certain representations that Barclays had made to HP when it provided the $8.8 billion loan.

Item 3:

Mr. Sivere wrote in his letter to the Barclays board, he also believed that Barclays entered into certain suspicious derivative transactions with HP at the time of the Autonomy acquisition. “Some of these transactions included FX trades, a dollar/sterling option and C.F.D.s traded prior to the announcement (and also the bridge loan pegged to a possible manipulated Libor rate),” he wrote. “The unwinding of such derivative transactions most likely occurred during 2012 which should have raised suspicions of what exactly the Hewlett-Packard write-down was related to if not for Autonomy’s purported accounting improprieties, misrepresentations and disclosure failures.

The article includes other interesting information. I urge you to read it.

My view is that the HP Autonomy deal remains interesting to me. The amount HP paid for Autonomy set a high water mark for a content processing acquisition. This write up suggests that there is information about the deal which has not been revealed in publicly accessible articles.

The parallels with the Fast Search & Transfer matter may be worth exploring.

Stephen E Arnold, September 15, 2015


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