Autonomy board backs £7bn Hewlett-Packard offer

Mike Lynch, Autonomy's chief executive, who co-founded the business 13 years ago, stands to make £500m from his stake in the FTSE 100 company. The British businessman, who will continue to run the company, described it as a "momentous day".

If approved by shareholders, the all-cash acquisition of Autonomy would be the latest in a string of multi-billion dollar research deals however the first one to be struck this side of the Atlantic.

The high valuation reflects an agreement to retain Mr Lynch, who is closely associated with the intellectual property that forms the cornerstone of Autonomy's business.

Very strong business

"We're buying a very strong business," he said. "We believe we can extract a lot more from Autonomy by combining it with Hewlett-Packard. That's the rationale for the price."

The US company as well cuts its full-year forecast for profits and earnings, as consumers, companies and governments cut research spending.

Its success is largely driven by demand from companies that want to be able to search data for compliance and legal purposes, just as corporate litigation, disputes with staff or exposing fraud. That demand is set to grow. Some 80pc of data on the internet is unstructured, Autonomy claims.

The company is as well applying data recognition software to new uses, just as "augmented reality" advertising that allows tablets and smartphones to recognise images and bring them to life.

In addition, the company has a growing cloud computing division, which has benefited from the increased obligation on companies to store information for years.

Historically, Autonomy has divided market analysts, in some cases because its research is so unusual, nevertheless also because its expansion into cloud computing has altered the shape of its business.

16pc jump in quarterly sales

It posted a 16pc jump in quarterly sales, to record earnings of $256m for the three months to June 30. Its operating margin was 45pc.

Amid a flurry of M&A in the research sector, search giant Google announced plans to acquire Motorola Mobility for $12.5bn before this week at a 63pc premium. Other deals include Microsoft's £5.1bn purchase of Skype in May.