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Ethioplanet
Sunday, September 11, 2009
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Xerox-to-Buy-Business-Process-Outsourcing-Solution-Provider-ACS.htm
Xerox (NYSE:XRX) revealed this morning that it will buy business process outsourcing solution provider Affiliated Computer (NYSE:ACS) Services to create a $22 billion global enterprise for document technology and business process management. The deal is initially value at $6.4 billion, and it is the largest acquisition Xerox has ever made.
In a Webcast, Xerox CEO Ursula Burns stressed the synergies between Xerox and ACS, calling the solution provider a �leader� in the document management space. In forming the $22 billion potential powerhouse, $17 billion will be in recurring revenue or services, �a significant boost to our profitable annuity stream,� she said. The revenue Xerox generates from services will triple from $3.5 billion in 2008 to an estimated $10 billion in 2010.
ACS (VAR 500 rank 23) will operate as an independent organization and initially will be branded ACS, a Xerox Company. Lynn Blodgett, current president and CEO of ACS, will head the organization; he will report to Ursula Burns.
Blodgett recalled ACS� founding in 1988 as a bank data processor and how it has evolved to become a top-tier player in BPO. �Our recurring revenue model has allowed us to generate healthy growth. The growth potential with this deal will generate solid returns and provide employees the opportunities to expand their expertise,� he said.
�Eighty percent of ACS revenue is in BPO [roughly $5 billion], and it�s all image-intensive � documents, images. We have video data, too all of that can be made more efficient through technology Xerox brings to us.�
While ACS has strong business relationships in the U.S., its presence in Europe and Asia is comparatively weak. Xerox�s brand, innovative technology and infrastructure globally will bolster ACS� position and provide Xerox with a broader BPO offering, putting the company in direct competition with the likes of Cognizant.
The deal will be a cash and stock transaction valued at $63.11 per share, or $6.4 billion, as of the closing price of Xerox stock on Sept. 25. Larry Zimmerman, vice chairman and CFO of Xerox, said the combined companies expect to see annualized pretax cost �synergies� of $300 million to $400 million in the next three years. The deal should be completed by the first quarter of 2010.
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