Another twist in HP's Autonomy dispute

Hewlett Packard (HP) has revealed its intention to sue the UK arm of accountancy firm Deloitte over its role in HP’s acquisition of British software company Autonomy Plc nearly three years ago.

HP made the announcement during the latest hearing in its protracted and bitter legal dispute with Autonomy’s former executives. The firm’s decision to pursue a case against Deloitte emerged as US Judge Charles Breyer refused to approve part of a settlement reached between HP and the shareholder group which is suing it over the Autonomy acquisition. According to Judge Breyer, HP’s attempt to pay the investors’ lawyers was a "potentially fatal" clause which meant he was not able to agree to the settlement.

A spokesman for HP noted that the company “will continue to work to hold the former executives of Autonomy as well as Autonomy’s auditor, Deloitte UK, responsible for the wrongdoing that occurred.”

Computing giant HP acquired Autonomy in an $11bn deal in 2011, but less than one year later was forced to make an $8.8bn write down on the transaction. HP alleges that the November 2012 write down came as a direct result of a number of accounting improprieties, misrepresentations and disclosure failures carried out by Autonomy and its executives during the acquisition process.

Following an extensive internal audit, HP dramatically revised Autonomy’s 2010 performance and noted that it had discovered “extensive errors – including misstatements” in Autonomy’s accounts, which were audited by Deloitte.

Deloitte has refuted HP’s claims, saying that any case brought against the firm would be “utterly without merit”. Deloitte has noted that neither HP nor Autonomy enlisted its services to carry out due diligence during the sale of Autonomy and that the firm merely served as an auditor to Autonomy at the time of the transaction.

Former Autonomy executives have claimed that the dramatic decline in the unit’s value was a result of poor integration planning on HP’s part, as well as in-fighting within the company’s wider organisation. Autonomy’s founder, Dr Mike Lynch, has also denied any wrongdoing, claiming that the company’s accounts were legitimate as they had been signed off by Deloitte.

News: http://www.cbronline.com/news/hp-to-sue-deloitte-uk-over-autonomy-deal-4354838

Goldman Sachs agrees $3.15bn mortgage settlement

BY  Richard Summerfield

Goldman Sachs has agreed to settle its biggest financial crisis bill to date, agreeing a $1.2bn settlement with the Federal Housing Finance Agency (FHFA).

Under the terms of the deal, the bank has arranged to buy back $3.15bn in mortgage bonds from Fannie Mae and Freddie Mac, paying around $1bn to Fannie and $2.15bn to Freddie respectively. The move will bring about an end a lawsuit filed in 2011 by the FHFA in which the agency alleged that Goldman misled the two mortgage finance groups regarding the sale of over $11.1bn in mortgage-backed securities between 2005 and 2007. Although Goldman agreed to the settlement, the bank has continued to deny any allegations of wrongdoing; the bank’s settlement deal did not contain any admission of wrongdoing on Goldman’s behalf. The FHFA, which valued the settlement at $1.2bn, said the deal "effectively makes Fannie Mae and Freddie Mac whole on their investments in the securities at issue".

Goldman’s settlement is the latest in a string of deals related to the financial crisis, and is the largest legal penalty that the bank has paid in its 140-year history. The deal easily eclipsed the $550m settlement that the firm agreed in 2010 to conclude a complaint from the Securities and Exchange Commission regarding the bank’s handling of a complex mortgage-linked deal. The settlement with the FHFA comes shortly after Bank of America Corp agreed a separate mortgage deal with the Justice Department and a number of other government offices which totalled around $16.65bn. “We are pleased to have resolved these matters," said Gregory Palm, Goldman's general counsel, in a statement.

By reaching a settlement with the FHFA in August, Goldman has avoided the ignominy of a trial on 29 September. The trial would have been in relation to a pair of lawsuits that the FHFA filed against Goldman in 2011. The agency filed the suits hoping to recover damages from a number of financial institutions behind some $200bn in mortgage bonds bought by Fannie and Freddie that later experienced difficulty. The FHFA has concluded all but three of the 18 lawsuits it filed; to date the agency has recovered approximately $17.3bn from a cadre of banks including Bank of America Corp, Deutsche Bank AG and Morgan Stanley.

The Department of Justice will continue to investigate Goldman’s marketing of mortgage-backed securities. The FHFA is continuing to press ahead with its litigation against three other banks: HSBC Holdings Plc, Nomura Holdings Inc and Royal Bank of Scotland Group Plc.

News: http://www.bloomberg.com/news/2014-08-22/goldman-to-buy-mortgage-debt-for-3-15-billion-to-end-fhfa-probe.html

Working in South Africa

Following abuse of previous corporate immigration rules in South Africa, the government has recently implemented a program of reform. However, despite the changes, the situation remains tense.

FW speaks with Angelika Yakovchuk at WerthSchröderInc Attorneys about developments in corporate immigration in South Africa.

10Questions: Corporate immigration in South Africa

Mexico’s immigration reform

In recent years, the Mexican approach to corporate immigration has been drastically altered by the implementation of the 2012 Immigration Reform Act.

FW speaks with Juan Carlos Aguilar Noble at Fragomen Mexico, S. de R.L. de C.V., about developments in corporate immigration in Mexico.

10Questions: Corporate immigration in Mexico

Deal completion fails to match M&A appetite

BY Mark Williams

The world’s largest companies are expected to maintain a healthy appetite for M&A over the next six months, according to KPMG’s M&A Predictor, released in August 2014.

Price-to-earnings ratios have climbed 16 percent during the last year. At the same time, corporates are continuing to pay down debt and have an increasing amount of cash with which to fund deals. Although these factors create a fertile environment for dealmaking, appetite and increasing capacity are yet to result in the expected level of deal completions, says KPMG.

Despite the increase in announced deals through Q1 2014, which signals the return of a strong appetite for M&A, deal completions remains static, and the value of these deals continues to fall. Part of this is due to political interference in the deal market, evidenced by the proposed Pfizer deal in the UK and the GE deal in France.

That said, KPMG believes the overall the picture is a positive one. “Appetite remains strong, capacity is going up and we are starting to see an increasing number of deals being announced,” says Tom Franks, KPMG’s Global Head of Corporate Finance. “There is a danger, though, that domestic protectionism, certainly in markets like the UK, France and Canada, could damage the recovery. Furthermore, whilst increasing political instability in North America, the Middle East and Ukraine has not yet appeared to impact sentiment it remains a very real threat,” he added.

Report: KPMG M&A Predictor August 2014