Autonomy takeover brings cheers and tears to 'Silicon Fen'
Sunday 21 August 2011
When news hit Cambridge that Autonomy had surrendered to a £7.1bn takeover by US giant Hewlett-Packard, there were both cheers and tears in the "Silicon Fen".
One of the top advisers to Cambridge's hi-tech businesses, Niki Dixon, head of technology at Grant Thornton, said: "Locally there is a feeling that the sale could bring a large slug of money into the local economy as many people with share options will be in the money and may look to invest in start-ups or other businesses here. But it is also sad that another UK company has been sold overseas."
In the technology sector the biggest companies still in UK ownership are Cambridge-based ARM and audio and location chips maker Cambridge Silicon Radio (CSR). But HP's swallowing of Autonomy is the largest deal in the sector and is a boost to the UK's ambition to raise its profile as a technology hub.
Autonomy was founded in 1996 by Mike Lynch, a Cambridge graduate who was born in Ireland but grew up in Essex with his fireman father and nurse mother. Lynch, who now lives in Suffolk, wrote a doctoral thesis on the work of The Rev Thomas Bayes, the 18th-century mathematician. It was this work, still one of the best-read research pieces at the university, that led Lynch to formulate the basis for the software used by Autonomy today.
He is no stranger to developing and building a business: he founded and ran Neurodynamics, where much of Autonomy's proprietary technology was developed, and in 2005 Autonomy made a $500m (£300m) acquisition of former competitor Verity, which consolidated the company's position as No 1 in the market.
Lynch's 8 per cent stake in Autonomy creates a huge windfall, adding to the money he has already made from its previous flotations. He made more than £80m from Autonomy's previous listing in London and the US before its shares plummeted and 90 per cent was wiped off its share price in the 2001 dotcom crash.
But it is a different story today. On Friday, the day after HP announced its offer, shares in Autonomy Corporation were trading nearly 75 per cent higher in mid-morning trading – increasing the value by more than £10 a share.
HP made a recommended cash offer of £25.50 a share, a premium of around 64 per cent on Thursday's closing price. HP said the acquisition will grow its enterprise information software and it is now considering selling off its PC, tablet and phones business to concentrate on the more lucrative software and IT services. HP has sales of $31bn globally.
HP's own shares fell 20 per cent during early trading in New York on Friday amid unease at the 79 per cent premium paid for Autonomy. But for London the deal shows how undervalued UK technology firms are. Simon Clark, managing partner at Fidelity Growth Partners, said: "The hefty premium shows that the UK public markets have not taken our tech businesses seriously. Maybe we will see a re-rating in the UK after this deal."
Autonomy's software can track "unstructured data" such as voicemails and emails and has been used to detect corporate fraud, including in the US energy giant Enron.
Lynch will head HP's Cambridge-based software division. Although Autonomy's recent expansion has been stateside it is likely the deal will still be a boost for the city with further job creation. Of the 2,600 people employed, 400 are based in Cambridge. A £30m windfall will be shared among the Fens staff.
Lynch, who is a non-executive director of the BBC, may use some of his windfall to invest in other businesses in the area. He has already invested in London and San Francisco-based Blinkx, the world's biggest video search website, where he is a non-executive director.
HP is not the first US business to swoop on a Cambridge firm this year. In April, Datanomic, the developer of customer data quality software, was bought by Oracle for a rumoured $80m. Datanomic's 75 staff has remained at Cambridge Business Park and the site will become the hub for Oracle's data quality business.
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