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Autonomy chief against guarding British firms from foreign predators

Mike Lynch, the chief executive argues HP deal represented a vote of confidence in Britain and that Autonomy would stay here

The boss of Autonomy, which agreed a £7.1bn takeover by Hewlett-Packard last week, has spoken out against “Cadbury’s Law” to restrict foreign takeovers.

The US multinational’s swoop on Britain’s largest software maker has sparked a fresh row over foreign takeovers of UK companies and fears over British jobs. Business secretary Vince Cable will seek assurances from HP this week.

It is the largest sale of a European software maker and the biggest UK firm to fall into foreign hands since Cadbury was bought by Kraft last year. The US food conglomerate later reneged on its promise to keep Cadbury’s factory near Bristol open, which led to 500 job losses. The controversial hostile takeover was criticised by former trade minister Lord Mandelson, and triggered demands for legislation to make it harder for foreign companies to snap up British firms.

John Denham, the shadow business secretary, said on Friday the government should review whether controls could be put in place to protect certain strategic industries from foreign takeovers, although this would prove more difficult where mergers are agreed, as with the HP and Autonomy deal.

Mike Lynch, the chief executive who co-founded Autonomy in Cambridge in 1996, insisted that protection for UK companies was unnecessary, although he called for a level playing field.

“I don’t think there should be special protection but I do think there should be a level playing field. US software companies often have “poison pills” [defence mechanisms against takeovers] whereas UK ones don’t,” Lynch told the Sunday Telegraph. “As a matter of principle, I would like to see that any US company that has a poison pill can’t bid as easily for a UK company. If you have that kind of thing then it should work both ways.”

He stressed that the HP deal represented a vote of confidence in Britain and that Autonomy would remain in Britain.

“The mistake in that thinking is a fundamental misunderstanding of technology. If I have the type of technology Autonomy does which is cutting edge advanced stuff you can’t move that R&D. The people who sit there doing it are the world experts. They have family here. It is not like a biscuit factory and you buy a custard cream making machine in Kentucky and then you run it twice as fast. The people saying these things are rather out of touch with how advanced software works.”

Shares in Autonomy leapt 72% on Friday after it agreed to be bought by HP. Lynch, who will continue to lead Autonomy, has an 8% stake in the firm and could pocket half a billion pounds from the deal.

With big technology firms awash with cash, a rival bid could emerge, although some analysts think this is unlikely given HP’s high offer, and also question the rationale. Oracle has .8bn (£17bn) in cash, Microsoft has .4bn at its disposal and IBM .8bn. “We do not see any of these having the strategic imperative/intention to pursue a business like Autonomy,” said Morgan Stanley analyst Adam Wood.

Peel Hunt analyst Paul Morland noted that Microsoft had a good look at Autonomy before “sensibly” deciding to buy a much smaller competitor. “HP is now paying 3 times what Microsoft would have needed to pay three years ago for what is essentially the same software.”

However, analysts at Investec said: “Autonomy has an unique set of IP [intellectual property] and this would be difficult to replicate for other ‘big-data’ players, such as IBM, Oracle, EMC and Adobe, and therefore a counter-bid is possible. In addition, SAP has limited assets in this field and with its in-memory strategy seems to be becoming more interested in infrastructure assets. However, we believe that any offer would need the approval of Mike Lynch and thus cultural fit could be an issue.”

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