The Story of the HP and Compaq Merger
In 2002, two big computer companies, Hewlett-Packard (HP) and Compaq, decided to join together. HP paid $25 billion to buy Compaq. This was a huge event in the world of technology. The idea for the merger came from the CEOs, Carly Fiorina of HP and Michael Capellas of Compaq. They had a conversation that led to the big plan, which was announced in September 2001.
The main reason for the merger was to make the new company the world's biggest computer maker. HP also wanted to become stronger in business solutions. Compaq had many successful products, and HP hoped that by joining them, the new company would be more successful than both were on their own.
However, many people in the industry and even some shareholders were not happy about the plan. Walter Hewlett, the son of one of HP’s founders, was strongly against it. He tried to stop the merger, saying it would make HP weaker. Other business leaders also criticized the deal.
Despite the arguments, the boards of both companies and most shareholders approved the merger. HP shareholders then owned 64% of the new company, and Compaq shareholders owned 36%.
The process of joining the two companies was very difficult. More than 1,500 employees worked on plans for how the new company would operate. When the merger was finished, the new HP was ready to start its work.
But there were problems ahead. Carly Fiorina, the CEO, made quick and bold decisions. This created tension inside the company, and she was later fired in 2005. Many people believe she was let go because of the difficulties from the merger. Her replacement, Mark Hurd, focused on making the company more efficient. Under his leadership, HP finally started to see the benefits and cost savings they had hoped for.
Looking back, many experts agree that the idea behind the merger was good, but the plan was not carried out well. The cultures of the two companies were very different, there was resistance from some people, and communication was not clear. Over time, however, HP was able to successfully combine with Compaq's assets and become stronger in the market.
In 2015, HP split into two companies: HP Inc. (for computers and printers) and Hewlett Packard Enterprise (for business solutions). This showed that the tech world was changing and companies needed more focused strategies.
The HP-Compaq merger is a great example of how complicated it is when companies join together. It teaches us that it's important to have a good plan, that different cultures must work well together, and that you need to get help from all important people before a merger.
HP-Compaq Merger: Lessons in Relational Due Diligence
The HP-Compaq merger teaches us important lessons about M&A due diligence. It shows us that due diligence is not just about checking numbers. It is also about understanding people and how a company works.
Here are the key lessons we can learn:
1. People and Culture Matter More Than Numbers
The HP-Compaq merger showed that checking only financial information and sales numbers is not enough. Leaders must also look at the company’s values and culture. The companies had very different cultures: HP focused on engineering, while Compaq focused on sales. This difference caused a lot of problems after the merger. Employees became unhappy and the companies had trouble working together.
2. Talk to Important People Early On
A key problem was that the company did not talk to important people, like shareholders, early enough. One shareholder, Walter Hewlett, strongly opposed the merger, which led to a public fight. It's very important to understand who has power and what they think about the merger. Talking to these people early on can help avoid big problems and costly fights later.
3. Planning Must Consider the Human Side
The company did not plan well for combining the two large companies. They did not think enough about employee morale and how the companies would become one. Although many people worked on the plan, it was not done well, and it took a long time to see good results. They should have planned for problems and given enough time and resources to help people deal with the changes.
4. Leaders Must Adapt Their Style
The CEO, Carly Fiorina, was good at pushing the deal forward. However, her leadership style was not right for the long and slow process of bringing the two companies together. She was not sensitive to the needs of the people and the cultures. This shows that the leader who starts a merger might not be the best leader to finish it. The next CEO, Mark Hurd, was able to fix the company and make the merger a success because he had a more practical and flexible leadership style. The merger’s success ultimately depended on good leadership.
In short, the HP-Compaq merger teaches us that looking at only money and business strategies is not enough in M&A. To be truly successful, a company needs to consider the people, the culture, and the human challenges that can affect the merger.
