We all find our job a bit torturous at times. But when workers liken theirs to waterboarding, it is surely grounds for concern.
That was how some employees of Autonomy, the British software company that was taken over by U.S. technology giant Hewlett Packard, reportedly described life under their new owners.
The bid was a drama in itself. The takeover was part of a bigger plan by HP to also spin off its PC unit – a proposal that was ultimately abandoned and led to the ousting of the chief executive officer. But months after the $10.3-billion (U.S.) takeover, the internal wrangling appeared to be hitting the bottom line.
In May, citing weak sales and poor management at the subsidiary, HP said Autonomy founder Mike Lynch was leaving, amid a broader shakeup that would cut 27,000 jobs.
It also emerged that senior employees from the software developer had been steadily walking out of the door, with 25 per cent of the original Autonomy staff departing before their erstwhile leader made his exit. The reason, it seemed, was a brutal clash of working cultures.
One former Autonomy staff member reportedly said the endless series of conference calls and form filling felt “like being waterboarded.”
The HP side rejected the accusations of a “stifling” culture that stopped the Autonomy team getting work done. Those sources said Mr. Lynch was asked to leave after a significant shortfall in revenue numbers.
Although HP did not break out the Autonomy revenues, the overall software division saw 2012 second-quarter revenues rise just $173m from the same period last year, which was before the Autonomy deal. Given that Autonomy had quarterly revenues of around $250m before it was acquired, this implies a significant slowdown at either Autonomy or HP’s other software operations.
The financial results highlight something that rarely catches the headlines, and that is of vital importance of post-merger integration in delivering value from takeovers.
The market has recently been presented with another challenging case. In its review of Chinese oil company CNOOC’s bid for Calgary-based Nexen Inc. at the end of July, Moody’s, the credit rating agency, highlighted the execution risk of the deal – particularly integration challenges and the Chinese group’s ability to retain the Canadian target’s management and operating expertise.
Staff retention is always tricky in takeovers. Some integration experts estimate that up to half a target’s work force may leave within 18 months of a takeover, making the HP case not so unusual.