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Watchdog investigating $11billion Autonomy-HP merger

Hewlett-Packard bought Autonomy for $11bn in 2011. Picture: Getty

Hewlett-Packard bought Autonomy for $11bn in 2011. Picture: Getty

  • by PERRY GOURLEY
 

THE Financial Reporting Council (FRC) watchdog is investigating accounts for software firm Autonomy in the run up to its takeover by Hewlett-Packard (HP).

The $11 billion (£7bn) deal has since led to allegations that Autonomy’s value was inflated, although the company’s former management have vehemently denied any wrongdoing.

The FRC, which sets standards for accountants and auditors, said it would specifically focus on Autonomy’s published accounts between 1 January 2009 and 30 June 2011, two months before the deal was announced.

The probe follows consultation with the Institute of Chartered Accountants of England and Wales.

The FRC does not have the power to bring criminal charges, but it operates a disciplinary process that can result in the suspension of accountants and fines.

Deloitte, which audited Autonomy’s accounts, said it would co-operate fully with the FRC probe.

“As previously stated, Deloitte had no knowledge of any accounting improprieties or misrepresentations in Autonomy’s financial statements,” a spokesman said.

“We conducted our audit work in full compliance with regulation and professional standards.”

US-based PC and printer maker Hewlett-Packard struck the deal to buy Autonomy in 2011 to make the business the centrepiece of a shift into software.

But little over a year later it wrote off some $5bn of the company’s value and accused its former management of accounting improprieties that inflated the company’s value.

Mike Lynch, Autonomy’s founder and former chief executive, has strenuously denied the allegations.

He has demanded that HP provide more details, but HP has said that it wants the claims to be heard in court.

Lynch said yesterday: “We welcome this investigation. Autonomy received unqualified audit reports throughout its life as a public company.

“This includes the period in question, during which Autonomy was audited by Deloitte. We are fully confident in the financial reporting of the company and look forward to the opportunity to demonstrate this to the FRC.”

HP confirmed in December that it had passed evidence from a whistleblower to the US department of justice, the Securities and Exchange Commission and the UK’s Serious Fraud Office.

It is also facing a number of lawsuits from disgruntled shareholders, which allege the company’s directors and auditors missed numerous red flags about Autonomy’s accounting. Autonomy was considered one of the UK’s biggest technology success stories, having pioneered software that helps companies to search data.

 

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