HP to buy Autonomy for £7.1bn

The deal, which will see the Cambridge-based UK information management company continue to run as a standalone business, is one of the biggest acquisitions of a software firm in history

HP is to buy the British software firm Autonomy for £7.1bn, the companies announced on Thursday.

Mike Lynch of Autonomy

Mike Lynch shows off Autonomy's augmented reality tool earlier this year. Credit: Autonomy

Autonomy, which provides enterprise information management tools and posted record revenues of $256m (£155m) for the second quarter of this year, is one of the UK's biggest technology success stories.

The deal will see Autonomy retain its Cambridge base, and its UK employees will get a total of £30m in share options. Founder and chief executive Mike Lynch will continue to lead Autonomy and, as the owner of 8.2 percent of the company's shares, stands to make more than half a billion pounds from the deal.

The $11.7bn deal is the second-biggest acquisition HP has made, after its $13.9bn buy of EDS in 2008. It is also the second-biggest-ever purchase of a software company; Symantec still holds the record for its $13.5bn acquisition of Veritas Software seven years ago.

HP's announcement that it had successfully offered Autonomy £25.50 per share — a 64-percent premium on its closing price on Wednesday — came as the IT giant said it was to increase its focus on the enterprise, while canning its consumer-focused WebOS products and spinning off or selling its PC business.

"Autonomy presents an opportunity to accelerate our strategic vision to decisively and profitably lead a large and growing space," HP chief executive Leo Apotheker said in a statement. "Autonomy brings to HP higher-value business solutions that will help customers manage the explosion of information. Together with Autonomy, we plan to reinvent how both unstructured and structured data is processed, analysed, optimised, automated and protected."

Apotheker also welcomed the addition of Autonomy's cloud-based services to HP's portfolio. "We believe this bold action will squarely position HP in software and information to create the next-generation Information Platform, and thereby, create significant value for our shareholders," he said.

"This is a momentous day in Autonomy’s history," Mike Lynch said. "From our foundation in 1996, we have been driven by one shared vision: to fundamentally change the IT industry by revolutionising the way people interact with information. HP shares this vision and provides Autonomy with the platform to bring our world-leading technology and innovation to a truly global stage, making the shift to a future age of the information economy a reality."

Fen focus

Autonomy said in a statement that all key research and development would remain in Cambridge, where it has around 175 staff, and HP said it would run its acquisition as a standalone business.

HP explained the motivation behind the purchase by saying it will make HP the leader in enterprise information management, while also letting it "reinvent the $55bn business analytics software and services space, which is growing at eight percent annually".

The IT giant also said Autonomy will bolster its cloud services with "key assets for information management and data analytics", and would help HP in key industries including government, financial services, legal, pharmaceutical and healthcare verticals.

The fact that Autonomy is a big money-spinner does not hurt either — HP pointed out that the company has a consistent record of double-digit revenue growth, with 87-percent gross margins and 43-percent operating margins in the 2010 fiscal year.

"Autonomy sees the information transformation and subsequent market opportunity exactly as we do," Apotheker said in an earnings call on Thursday. "Some acquisitions require heavy lifting, but bringing Autonomy into the HP world will be seamless and highly complementary."

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