HP has announced that it is to offer to buy UK Autonomy for c$10.3b or £25.50 per share – a c78% premium on their £14.29 close price tonight.
Before I retire for the night, I just wanted to express my ‘raw’ feelings on the HP/Autonomy news tonight.
I first want to make it clear that I’ve been a very long term Autonomy shareholder and therefore stand to gain many times what I paid for the shares. Also, I’d like to class Mike Lynch as a friend – certainly we have known each other for years because of our mutual association with the Prince’s Trust.
Back in 2006, ‘my company’ Ovum received a bid from Datamonitor that was at an even greater premium to our then share price. I wanted to reject the bid but our advisers told us, clearly, that we would be ‘in dereliction of our duty as directors’ not to consider it ‘very seriously’.
I suspect Mike Lynch might have been in a similar situation and might even have similar emotions tonight. Sure, getting a $10.3b valuation for a British software company is unprecedented. It is a fantastic achievement for Lynch. But Autonomy was, in my book, the ‘Best of British’. It was THE example of how a British company could become a global leader…in software.
It isn’t ownership that really matters. It is where a company is HQed. Autonomy’s HQ is in Cambridge. It was a magnet for the area. It created jobs not just for entry level graduates in the UK, but in all the support activities like brokers, advisers, legal beavers, accountants etc. It created a beacon that others aimed for.
It is rumoured that, assuming the deal proceeds, Lynch will head up Software at HP. Somehow I just don’t see Lynch in that kind of corporate role. It was often said (indeed in criticism) that Autonomy was more like a start-up than a FTSE100 company. What I do see is an almost immediate shift of HQ functions across the pond (See Note below). Then, regardless of assurances that might now be given, how long will it take before R&D goes with it? I’m afraid to say that, as an ‘olde’ analyst, I can ‘write the book’ on what happens when US companies take over UK software houses. There are no happy endings.
So as Lynch contemplates his c£800m fortune and I look at my rather more modest, but still rather attractive, gain – I will be going to bed tonight with a metaphorical ‘tear in my eye’.
RIP the Best of British Software.
Note - Mike Lynch has said overnight that HP's Software operations, which Lynch will lead, will be based in Cambridge, UK. Indeed it is being lauded as 'a significant boost to the UK tech sector'. I, of course, hope that this will be the case. I hope this will be one of the first such acquisitions that has a 'happy ending'. 'Hope' and 'the reality' are often different.