Call me an securities filings nerd, but one of my favorite things about any merger of public companies is when they file the “background of the merger” proxy. Today, Palm filed its latest proxy giving us the details of events that led to the merger with Hewlett-Packard. I’m still digesting the timeline, but in a nutshell, Palm realized that in February, after the poor launch with Verizon Wireless in January, the roof was caving in:

“At a meeting held on February 17, 2010, several weeks after the Verizon launch, the Board reviewed anticipated results for the quarter ending February 26. Palm’s projected non-GAAP revenues* for the quarter were now $298 million as compared to the operating plan of $407 million, and projected non-GAAP revenues for the quarter ending May 28 were now $226 million as compared to the operating plan of $605 million. As a result Palm’s projected non-GAAP revenues for fiscal year 2010 were now under $1.2 billion as compared to the prior projections of $1.6 billion to $1.8 billion. These new projections revealed that the business was on a significantly different revenue trajectory than previously anticipated, and management indicated that this trend was likely to affect results in fiscal year 2011 as well.”

Boy, that might be the euphemistic understatement of the year.

Those problems started to scare partners:

“The shortfalls in revenues and the increases in cash consumption were the result of disappointing consumer adoption of Palm’s products. These trends adversely affected Palm’s revenues and cash flows as existing and planned wireless carriers reduced projected orders and pushed out delivery of existing orders into subsequent quarters. “

Palm started with a list of 24 potential partners, but quickly narrowed that down:

“From February 25 to April 1, Palm management, Goldman Sachs and Qatalyst Partners were in contact with a total of 16 companies including HP. Of these, six companies, including HP, entered into nondisclosure agreements and participated in meetings with Palm and its advisors to review non-public information concerning Palm regarding a strategic transaction.”

The proxy says three companies, including HP, presented “preliminary” offers to buy the company. It doesn’t say who the other two companies were. Two other companies made inquiries about just buying Palm’s intellectual property:

“A fourth company, referred to as Company C, had initially been in discussions with Palm regarding an intellectual property transaction and later made a proposal to acquire Palm.

A fifth company, referred to as Company D, contacted Palm on March 18 to discuss an intellectual property transaction but did not make a proposal to acquire Palm. Company D did not enter into a nondisclosure agreement and did not review non-public information about Palm. Discussions with Company D continued intermittently until April 15.”

Palm said it wasn’t inclined to an IP sale and asked for firm offers to buy the company. HP originally offered $4.70 per share in cash. A second company matched HP’s bid. A third company proposed a stock deal (no value disclosed) and said it would take longer to close for regulatory reasons. Hmmmm.

Palm’s board told HP and Company A their offers weren’t good enough. Company B dropped out at this point, leaving just two bidders. At this point, Company C re-entered the picture offering $6 to $7 per share and offer to close in 14 days. Things got serious enough that Company C drew up a proposed merger document. HP bumped up its offer to $5 per share, but said that was it.

But at the same time, Palm’s board was unhappy with Company C’s proposal for several reasons, including a $60 million kill fee if Palm got a better offer. HP, meawhile, raised its offer to $5.70 per share.

Company C wouldn’t budge, and eventually, HP and Palm sealed the deal on April 28.

Palm also adopted a bunch of incentives and bonuses to retain and reward executives and rank and file employees. CEO Jon Rubinstein leads the pack with $6.6 million in accelerated options and cash bonuses.

So: Any thoughts on the true identity of Company C (and A and B)?

UPDATE: For its troubles, it looks like Qatalyst Partners, founded by Frank Quattrone, which advised Palm on the deal, stands to collected $16.5 million if the deal closes. That breaks down to $14 million if the deal closes, and $2.5 million for its analysis.

That’s not bad considering that Goldman Sachs in only in line to collect “$14 million, $3.5 million of which was payable upon the execution of the merger agreement, and the remainder of which is contingent upon and payable at consummation of the transaction.”