Today HP announced the acquisition of EDS and this was in stark contrast to the process Microsoft used to acquire Yahoo.

Execution:

This merger significantly closes the competitive advantage IBM has in outsourcing effectively closing what is now a better than 60% lead enjoyed by IBM over HP to around 20% in this space. In addition, as a result of the process that was created during the Compaq merger HP has been able to acquire Mercury Interactive successfully and now has a practiced team and process capable of doing EDS relatively easily.

Approach was clean with the merger attempt only becoming visible when the outcome was near certain. This both better assures the successful completion of the merger and limits the time opposition has, and every merger has opposition, to put together a response.

Finally, HP has demonstrated significant management competence since Mark Hurd took over the company and Shane Robison’s strategic insight is now proven giving HP the benefit of the doubt in terms of big moves like this. This helps establish a baseline of support both inside and outside of HP which significantly enhances the potential for success for the result.

Exposures:

Exposures exist on several fronts. First HP has a unique culture and tends to be internally uniquely bureaucratic which will likely create conflicts that EDS will have to work though and inefficiencies EDS may not see coming. Second, EDS is currently largely independent and this may be seen as an advantage against IBM Global Services, under HP this independence will be seen as compromised and this may reduce EDS’s available market. Third, Merger’s always create uncertainty in the merged units and critical employees in both HP and EDS may be at risk to other firms wishing to recruit them.

Net:

Overall, however, this has been very well executed so far and demonstrates the value of having an experienced merger team and a strong strategic focus.