All aboard! The train is leaving the station

by Vault Consulting Editors | September 30, 2009

  • My Vault

Following up on my post last week covering Dell's announced purchase of Perot Systems, another hardware firm has jumped on the bandwagon. This time it's Xerox that's taking the plunge, picking up outsourcer and service provider ACS. (Is anyone else finding it odd that most of the snapped-up firms lately have been Texas-based?) This is the biggest acquisition in Xerox's history (the 54,000-strong Xerox will be picking up ACS's staff of 74,000 for around $5.6 billion, and taking on $2 billion in debt in the process), and is another desperate attempt by a tech firm to retain customers and stay in the game in the face of diminished returns from the hardware business.

[As another sign that this shift in the tech market is here to stay, HP has just renamed its EDS unit (which for the past year after its acquisition has been known as EDS, an HP Company) to HP Enterprise Services, formally enmeshing the services branch into its overall branding. In HP's own words, "The name change emphasizes the business unit’s global role as the enterprise technology services component of HP’s portfolio. It supports a yearlong effort to transfer to HP the strong services brand equity that EDS has built over nearly 50 years."]

While many investors criticized Xerox CEO Ursula Burns for taking such a huge risk with the ACS deal, this acquisition is only the latest in a string of deals that shows a general boost in confidence ("executive swagger," I believe is how NYT's DealBook column puts it) in the business world. A quick search for the latest news on Abbott Laboratories, Kraft and Walt Disney will tell you as much. But unlike the frivolous spending of a few years ago, the deals that we've been seeing in the tech sphere of late are of a more practical nature—one company acquiring another to broaden its service base. As Ted Rouse of Bain's global M&A practice notes, "If you're healthy, it's a great time to acquire inexpensively. But it's an awful time for two weak companies to merge."

Filed Under: Consulting

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