Is This Deal "a Merger of Equals"?

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Is this deal “A Merger of Equals”?

As per theory Merger of equals combines two firms that have equal power. The board of directors and senior management of the old companies get absorbed and hold positions in thenew company. Also the shareholders of the old companies share the prospective synergiesequally.Considering the above theoretical criteria’s and using the figures from the table above(Pessimistic Scenario, 50 % Synergy division) the share price which HP should offered toCompaq is $ 15.82 , very close to the existing deal value of $ 14.68. Also the total deal valueas per this scenario turns out to be $ 26.72 billion (close to the current deal value of $ 25 billion). So based on these criteria’s and figures calculated it can be inferred to be a “Merger of Equals”. Now considering the flip side of the coin i.e. considering an Optimistic Scenario, 50%Synergy value sharing we get a share price of $20.26 and a deal value of 34.23 Billion, whichis significantly different and high compared to the current deal value. So based on these itappears not be a “Merger of Equals” deal.Also if we take the quick and dirty calculation method into consideration there also asignificant premium has been paid to Compaq which negates the very criteria of equal premium sharing in “Merger of Equals”.

Evaluation of Integration Plan

HP has realized the difficulties and complexity of integrating the enterprises as the twocompanies differ in their culture and competencies in areas of operation. Thus, they haveestablished an integration office to go through the whole process. The proposed integration plan called for a consolidation of HP’s and Compaq’s product lines into four major operatinggroups namely, services, imaging and printing, access devices, and information technologyinfrastructure. This implies that redundant and overlapping product groups