Get All Access for $5/mo

Hewlett-Packard in Hot Water Again Over Botched Acquisition A new lawsuit by HP shareholders highlights the need to do due diligence when buying a company.

By Brian Patrick Eha

Opinions expressed by Entrepreneur contributors are their own.

Hewlett-Packard's ongoing acquisition controversy serves as a cautionary tale for entrepreneurs involved in buying another company or being acquired themselves. HP shareholders are now suing the personal computer giant for failing to properly vet the financial practices of Autonomy, the British software maker it acquired last year.

The lawsuit filed on Friday comes nearly six months after HP took an $8.8 billion writedown on Autonomy, signifying that HP believes the true market value of its new subsidiary is little more than one-tenth of the $10 billion it paid to purchase it in 2011. The writedown came after Palo Alto, Calif.-based HP alleged it had discovered dubious accounting practices within Autonomy.

In a statement emailed to, HP says it trusted Autonomy's own financial statements and claims, as well as those of its auditors, to give an accurate picture of the British company's health. "Those facts and figures appear to have been willfully manipulated by certain Autonomy employees," says Michael Thacker, director of media relations for HP, in the statement.

Autonomy co-founder Mike Lynch, who is no longer with the company, has been vocal in his denial of HP's claims. "We continue to reject the allegations made against us by HP," Lynch said in an open letter published on his website in March. "We refuse to be a scapegoat for HP's own failings."

HP investors are angry. The shareholder lawsuit filed in federal court in San Francisco claims that HP failed to perform due diligence before making the acquisition. The complaint also accuses HP's leadership of misleading investors to cover up their own mistakes.

For its part, HP is contending that it has taken proper steps ever since learning last November of the alleged accounting scandal inside Autonomy. "We have handed over our information of serious misrepresentations in Autonomy's accounting to the proper authorities, namely the SEC and the Department of Justice and, in the U.K., the Serious Fraud Office," Thacker says. "We continue to cooperate and provide requested information to the relevant authorities on an ongoing basis."

Related: 3 Rules for Selling a Business: Lessons From the HP-Autonomy Fiasco

Brian Patrick Eha is a freelance journalist and former assistant editor at He is writing a book about the global phenomenon of Bitcoin for Portfolio, an imprint of Penguin Random House. It will be published in 2015.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Starting a Business

Your Business Will Never Succeed If You Overlook This Key Step

A comprehensive guide for startups to achieve and maintain product-market fit through thorough market research, iterative product development and strategic scaling while prioritizing customer feedback and agility.

Business News

How to Be a Billionaire By 25, According to a College Dropout Turned CEO Worth $1.6 Billion

Austin Russell became the world's youngest self-made billionaire in 2020 at age 25.


How to Spot the Perfect Executive for Your Company

Hiring senior talent to run a team is a crucial moment in the story and trajectory of a company. Whether you need to hire senior talent now or are looking to gather insights for the future, it's important to be prepared for a gap in a crucial leadership position.

Side Hustle

This Former Disney Princess Lived 'Paycheck to Paycheck' Before Starting a Side Hustle at Home — Now She Makes $250,000 a Year

Victoria Carroll's income was "sporadic" until a friend encouraged her to take her talents to Fiverr in 2018.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.