This paper presents the XMM-Newton first-light observations of the Hickson-16 compact group of galaxies. Groups are possibly the oldest large-scale structures in the Universe, pre-dating clusters of galaxies, and are highly evolved. This group of small galaxies, at a redshift of 0.0132 (or 80 Mpc) is exceptional in the having the highest concentration of starburst or AGN activity in the nearby Universe. So it is a veritable laboratory for the study of the relationship between galaxy interactions and nuclear activity. Previous optical emission line studies indicated a strong ionising continuum in the galaxies, but its origin, whether from starbursts, or AGN, was unclear. Combined imaging and spectroscopy with the EPIC X-ray CCDs unequivocally reveals a heavily obscured AGN and a separately identified thermal (starburst) plasma, in NGC 835, NGC 833 and NGC 839. NGC 838 shows only starburst thermal emission. Starbursts and AGN can evidently coexist in members of this highly evolved system of merged and merging galaxies, implying a high probability for the formation of AGN as well as starbursts in post-merger galaxies.
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