Tim Human’s monthly M&A column
Hewlett-Packard got some stick for its third quarter results announcement, which included the news it would buy Autonomy for $11.7 bn and explore a spin-off or sale of its PC division.
The acquisition and possible divestment were leaked early to Bloomberg, leading to a brief spike in the stock price. When the full results appeared, however, they revealed a big cut in full-year guidance, and critics accused HP of using an M&A scoop to distract attention from its poor earnings.
‘The M&A scoop that kicked off the news cycle looks like an attempt by HP to manage media coverage and distract attention from its dreadful earnings guidance,’ wrote Reuters’ Felix Salmon at the time. ‘And, at least for a few short minutes, it actually worked.’
It is questionable whether HP would leak news in this way; it seems unlikely such a big firm would use such a clumsy communications strategy. ‘I would like to think HP is a little more sophisticated than that,’ notes one adviser.
In any case, IR consultants advise quashing thoughts about trying to bury bad news with good. ‘You don’t get anything from it,’ says Gene Marbach, group vice president of New York-based PR and IR firm Makovsky + Company. ‘All you get from trying to manipulate news is a loss of credibility.’
‘You might get a short-term benefit, but once people realize there’s other news that’s not so good, you subsequently pay the price,’ agrees Brad Wilks, managing director of Sard Verbinnen, another New York-based corporate and financial communications firm. If HP did try to manipulate the news, ‘it was ill-advised to do so,’ Wilks adds, ‘because your most important stock-in-trade in this business is your credibility’.
For big M&A news, Wilks advises companies to announce the story straight to the market, and then follow up with an analyst call, giving the sell side the chance to assimilate the information. The analysts will then be available ‘to comment or opine to the press,’ he says. ‘If you don’t go that route, it’s everybody’s best guess trying to interpret the press release.’
This article appeared in the October print edition of IR magazine.
