Welcome to The Business Buying Academy with Sieva Kozinsky. Here's what we have in store for you today:

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• A coin flip created a $20 billion empire
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🔑 From Coin Flip to $20 Billion Empire

Imagine starting a company with a coin flip and turning it into a $20 billion empire.

That's exactly what Bill Hewlett and David Packard did.

In 1939, two Stanford graduates started a business in a Palo Alto rental property with just $538 in capital.

The company we now know as HP evolved from a maker of audio oscillators into a global tech giant over the next several decades.

Mostly thanks to a great acquisition strategy.

Many business history books will focus on HP creating the programmable calculator or mass producing inkjet printers.

But for this newsletter, I want to focus on their smart use of acquisitions to expand, while fiercely protecting the unique culture (they called it the "HP Way.")

The Early Days: Bootstrapping and First Acquisitions

Hewlett and Packard's partnership began with a coin flip to decide the company name.

Hewlett won.

That's why it's called Hewlett and Packard, not Packard and Hewlett.

Their first product, the HP200A audio oscillator, caught Disney's eye for Fantasia, kickstarting revenue.

But growth wasn't all organic.

By the 1950s, as HP diversified into test and measurement equipment, they began eyeing acquisitions to accelerate entry into new markets without reinventing the wheel.

An important early move came in 1958 with the purchase of the Sanborn Company, a medical electronics firm, for about $10 million in stock.

This was before the craze of buying up tech hardware companies.

Instead, this acquisition was in unchartered territory. Very few knew how to value and acquire electronics companies at that point.

Sanborn's electrocardiographs complemented HP's instrumentation expertise, allowing them to tap into healthcare tech.

Packard, who served as CEO, emphasized integration when buying new companies.

Employees from acquired firms were welcomed into the HP fold, not stripped for parts. This set the tone for future deal: Buy to hold and enhance, not flip.

Packard's philosophy: "We avoid the word 'acquisition' and talk about 'joining forces.'"

The 1960s Boom: Scaling Through Targeted Buys

The 1960s marked HP's acquisition heyday, aligning with the tech boom.

In 1965, they acquired F&M Scientific Corporation, a Pennsylvania-based leader in gas chromatography instruments, for an undisclosed sum (estimated in the millions).

F&M's tech improved HP's analytical division, helping them dominate scientific instrumentation.

Rather than gutting the company, HP invested in R&D, turning F&M's products into best-sellers.

They also acquired Moseley Autografik in 1961 and Data Systems Inc. in 1964.

The "HP Way," formalized in the 1950s and improved in the 1960s, was the glue:

During integrations, Packard personally visited acquired sites, fostering loyalty. This contrasted with cutthroat conglomerates of the era, like ITT under Harold Geneen, where acquisitions often led to bureaucracy and resentment.

Navigating the 1970s–1990s: Holding Steady Amid Challenges

The 1970s brought economic turbulence (oil crises and inflation) but HP's hold strategy shone.

They acquired companies like the calculator division of Bowmar Instrument in 1975, solidifying their pocket calculator dominance.

In the 1980s, amid PC wars, HP bought Apollo Computer's workstation tech indirectly through partnerships, but direct buys like the 1992 acquisition of Texas Instruments' printer business (pre-1990s roots) expanded their other lines of business.

By the 1990s, HP was a $20 billion behemoth, with acquisitions like Convex Computer in 1995 ($150 million) for high-performance computing.

Yet, the core remained: hold for synergy.

Tragedy struck with Hewlett's death in 2001 and Packard's in 1996, but their legacy endured until the 1999 Agilent spin-off and 2002 Compaq merger (post-1990s, but rooted in earlier strategies).

Lessons for Aspiring Business Buyers

1. Culture as the Ultimate Moat: When buying, prioritize cultural fit. HP's integrations retained 90%+ of talent by embedding the HP Way: trust, autonomy, and shared profits. For today's buyers, this means due diligence on people, not just assets. A mismatched culture can erode value faster than market shifts.
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2. Buy for Complementary Strengths, Not Size: HP targeted niche players like F&M to fill gaps, avoiding overpayment for hype. Lesson: In tech or innovation-driven sectors, seek acquisitions that enhance your core competencies. Use them to build defensible positions, like HP's pivot from oscillators to computers.
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3. Patience in Holding Pays Dividends: Unlike raiders flipping for quick gains, HP held and invested, turning buys into cash engines. Their 9% average annual R&D spend (vs. industry 5%) fueled growth. Aspiring holders: Resist short-term pressures; compound value through operational excellence and reinvestment.

Have a great day,

Sieva

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Disclaimer: nothing here is investment advice. Please do your own research. The information above is just for information and learning.

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