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OK but how is that possible? Before you sell a company there is a long due diligence process, where all papers and everything else is given to inspection, and I
by NiceWayToDoIT 5y ago
OK but how is that possible? Before you sell a company there is a long due diligence process, where all papers and everything else is given to inspection, and I can imagine team of 10 people lawyers accountants and experts going to every, note, paper and even paperclip.
Also isn't rule of market capitalism, if I am the seller I can put any price in the product/service I own, if you do not like my price you do not have to buy?!
- SirSourdough 5y agoThe short answer is that HP didn’t identify the fraud when they did their due diligence. Just because you look at a businesses financials doesn’t mean you’ll identify fraud they are trying to hide. As far as the seller determining the price, that’s true but the price they set is set on the basis that they aren’t lying about what they are selling you. If someone sells you a pure gold box that turns out to just be aluminum wrapped in gold foil, that’s fraud even if you agreed to pay for the pure gold box. The seller did not provide the thing you agreed to pay for. It’s the same in this case, the seller allegedly lied about what they were selling to get HP to agree to an inflated price.
- NiceWayToDoIT 5y agoThat scenario looks fishy to me, even when you buying second hand car you do bit of exploration and for buying something with price tag of £11,000,000,000 well you dig a bit deeper, and due diligence is not just going to your financial statements and what is usually accessibly in UK publicly. During that process you dig trough everything, bank statements, expenses, salaries, earnings, revenue streams ... everything. Personally, I think it is impossible HP has not seen something like that, or they have sent complete idiots to do due diligence.
- _se 5y agoI don't think you understand the complexity of this type of finance or the sophistication that's possible while committing fraud. These things are not necessarily simple to detect.
- NiceWayToDoIT 5y agoMaybe I don't as it must be some very sophisticated fraud when checking all in the following list they missed something like that. " Corporate attorneys generally review all the company’s financial information from the last five years, including income statements, balance sheets, cash flow and audit reports. Other financial documents that may be reviewed include projections, budgets and forecasts for the financials of the next five years and assess whether they are reasonable. Finally, corporate attorneys generally review all credit agreements, debts and contingent liabilities. " https://www.priorilegal.com/deals/mergers-acquisitions/manda-due-diligence-checklist https://www.priorilegal.com/deals/mergers-acquisitions/manda...
- _se 5y agoYes, and the entire point of this type of fraud is to deceive this exact process. The fraudster knows what due diligence is going to be performed.
- MichaelZuo 5y agoPresumably the folks regularly involved in the closing of 11 figure deals are capable of sniffing out deception. Though maybe the HP board cheaped out and hired the B team instead?
- epicureanideal 5y agoSeems like US companies only ever use the B team these days.
- analognoise 5y agoEven if they sent idiots to do the DD, if they find out later that there was fraud... it's still fraud. You can't just yell "No taksey backsies!". Given the list of sophisticated financial fraud mechanisms charged, even if it WAS mismanaged, it was still fraud.
- ekster 5y agoEven if the paperwork is going to be double checked, it is still fraud to lie on it.