This session at the M&A Conference at Wharton San Francisco was a conversion with Sergio Letelier, Esq., Vice President and Deputy General Counsel - Corporate, Securities and M&A at Hewlett Packard Enterprise (NYSE: HPE).

Having joined HP France’s legal department in 2002, Sergio and his team are responsible for global M&A, Corporate Compliance and Governance matters, and support to HPE’s worldwide Tax Department around corporate restructurings.

This wide-ranging discussion explored a number of topics at the forefront of M&A strategy and deal structuring, including innovative consideration structures, changing governance dynamics in both  domestic and cross-border deals, navigating regulatory and competition review, challenges associated with taxable and tax free divestitures, and methods for approaching acquisitions with the shifting taxation frameworks in the US, among other areas.

Letelier was gracious in discussing previous HP transactions when questioned about deal trends and insights. Moderator William Jefferson Black, Managing Director and Publisher of Transaction Advisors, first asked Letelier about merging entities with diverse corporate cultures, as well as how to manage a large entity acquiring a much smaller one.

Regarding the HP-Compaq merger, noting that one entity was centralized in its management, the other less so, Letelier said, “Make sure there is a sense of compatibility and a plan to address that.”

To the latter question, he advised, “Don’t destroy the value of the smaller entity; make sure you preserve the key value drivers.”

He further noted that an imbalance in size can be a perceived advantage in negotiation, but when it goes too far, it becomes a disadvantage.

Black and Letelier next discussed the Palm acquisition, the role of tax structures in M&A (“Tax cannot be the sole driver of a transaction.”) and the acquisition of Autonomy by HP. (Prior to the split into HPE and HP Inc).

Letelier noted that the Autonomy experience has led the Company to revamp its M&A process with well-defined “pattern detectors” and discrete steps for which stakeholders have a mandated window in which to express their view. As a result, “Deals are going faster with structured input.” 

With respect to the new U.S. Tax Act, Letelier noted that “we are repatriating cash and you will have to do something with that cash”; and that entities like HPE are studying, among provisions, the potential impact of the limitation on interest deductions.