The Cutthroat World of Technology Takeovers….
The Cutthroat World of Technology Takeovers….
2016-06-21 at 11:56:45 am #46056
Hp And The Cutthroat World of Technology Takeovers….
Emails Reveal Bitter Silicon Valley Fight
Animosity between Frank Quattrone and Meg Whitman on display
By Liz Hoffman and Maureen Farrell
Animosity between Silicon Valley heavyweights Meg Whitman and Frank Quattrone is on stark display in recently released court papers that provide a rare behind-the-scenes look at the cutthroat world of technology takeovers.
Simmering tension between Ms. Whitman, now the chief executive of Hewlett Packard Enterprise Co. , and Mr. Quattrone, one of Silicon Valley’s top investment bankers, erupted over Hewlett Packard’s purchase of Aruba Networks Inc. last year.
Ms. Whitman refused to negotiate with Mr. Quattrone’s firm, Qatalyst Partners LP, which was advising Aruba, and insisted another bank be brought in, according to emails a Delaware court made public. The Wall Street Journal previously reported on the dispute, but the emails show how bitter it was.
The emails were unsealed in a shareholder lawsuit over the takeover, following a request from the Journal. An Aruba investor has argued that Ms. Whitman’s influence in the selection of Aruba’s advisers created a conflict that resulted in an unfair price. HP and Aruba have said the deal was fair.
The correspondence offers a glimpse into the hypercompetitive world of merger banking, where personal relationships and public perceptions are paramount.
Qatalyst isn’t a party to the lawsuit, and a spokesman declined to comment on it. “Qatalyst has represented clients across the table from HP in the past and expects to do so in the future,” he said. HP declined to comment.
With a Rolodex built up over three-plus decades, Mr. Quattrone has become one of the biggest matchmakers in Silicon Valley. Take Aruba: He was a longtime golfing partner of the wireless-networking company’s lead director, Daniel Warmenhoven, and the two men serve on the board of the Tech Museum of Innovation in San Jose, Calif.
But Mr. Quattrone ran afoul of Ms. Whitman, emails show. The bad blood between Qatalyst officials and Ms. Whitman dates to her days as CEO of eBayInc. George Boutros, Mr. Quattrone’s longtime partner, advised Yahoo Inc. on abortive merger talks with the online auctioneer when he was at Credit Suisse Group AG. The discussions are alluded to in one email and confirmed by people familiar with the matter.
Then in 2011, Qatalyst advised software maker Autonomy PLC on its $11 billion sale to HP. The deal, which was struck under Ms. Whitman’s predecessor but while she was on the board, became a disaster for HP. The company took an $8.8 billion write-down and accused Autonomy of inflating its results. Autonomy’s founder has defended its accounting, and a criminal probe into the matter by British authorities was dropped.
Ms. Whitman’s feelings about the deal were still raw as talks with Aruba heated up in early 2015, the emails show. She dined with Aruba CEO Dominic Orr that January, a few days after British authorities dropped their probe. Mr. Orr later wrote to Mr. Warmenhoven: “Meg spoke with conviction and emotion over dinner that they were guilty. Qatalyst will argue the reverse but it does not matter. The way Meg emoted about this issue—I think if we don’t insert [a] buffer person, our negotiation will suffer severely.”
Mr. Warmenhoven spoke with Ms. Whitman himself and came away with the same impression. “Quatalyst [sic], Frank & George are not welcome in the negotiations,” he wrote in one email. “The issue is bigger than Autonomy and goes back to EBay & Yahoo,” an apparent reference to the merger talks years earlier. “Meg described George as ‘evil.’”
Mr. Boutros, who has worked with Mr. Quattrone since their Credit Suisse days, became CEO of Qatalyst this year as Mr. Quattrone became executive chairman.
In the dot-com rush, Mr. Quattrone took public some of the biggest names in technology before a conviction for obstructing justice—later overturned—temporarily halted his career. In 2008, he founded Qatalyst, which has become one of the most sought-after deal advisers in Silicon Valley. The firm ranks fourth this year for advising on U.S. technology deals, behind much larger rivals, and landed a coveted role with LinkedIn Corp. on its $26 billion sale to Microsoft Corp. , announced last week.
But some executives and rivals bristle at its style. The firm is known for fetching high prices for its clients, and some rivals complain Qatalyst has occasionally bluffed about the level of interest in companies it is selling—a charge Qatalyst denies and calls “false allegations” fomented by competitors. “Our advice is never clouded by the fear that if we push for the highest price we might offend the buyer,” the firm’s spokesman added.
In the face of Ms. Whitman’s resistance, Aruba hired Evercore Partners Inc. to handle face-to-face negotiations with HP, while keeping Qatalyst behind the scenes. Evercore was ultimately paid $7.7 million. Qatalyst got $30 million.
An Evercore spokesman declined to comment.
Ms. Whitman was livid when she learned Qatalyst would appear on the deal’s press release, court papers show. In an email to Mr. Quattrone just before the announcement, Mr. Warmenhoven said that Ms. Whitman “went on a rampage” and said she would “light up” if Qatalyst publicized its role in email blasts around Silicon Valley, as it tends to. The blasts often tout the high price Qatalyst secured for its client, which can rankle buyers.
Mr. Quattrone was eager to get back in favor with HP, which has recently split twice and remains one of the top technology deal makers—as well as a potential bidder for any number of Qatalyst’s clients. In an email to Ms. Whitman, he agreed to “tone down” public statements about his firm’s role but in return wanted a “clean slate” and a commitment that HP wouldn’t bad-mouth Qatalyst to prospective clients of the advisory firm.
Mr. Quattrone privately questioned whether Ms. Whitman would stick to any promise. “Not sure if I would trust any such agreement but shame on her if she doesn’t honor it,” he wrote his partners.