Xerox Acquires ACS for $6.4 Billion

By Lawrence Walsh  |  Print this article Print


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The acquisition being announced this morning will transform Xerox from a document management company to a multidimensional enterprise with business process management and system integration capabilities gained from ACS. The deal puts Xerox in a more competitive position against rivals Hewlett-Packard, Dell and IBM.

Xerox is moving away from its roots as a photocopier and document management leader to full systems integration and IT services with the acquisition of solution provider giant Affiliated Computer Services for $6.4 billion.

"By combining Xerox's strengths in document technology with ACS' expertise in managing and automating work processes, we're creating a new class of solution provider," said Ursula M. Burns, Xerox CEO, in a statement released this morning. "A game-changer for Xerox, acquiring ACS helps us expand our business and benefit from stronger revenue and earnings growth."

Xerox will hold a conference call with analysts and investors this morning at 8:30 a.m. ET.

The Xerox acquisition of ACS comes a year after printer rival Hewlett-Packard bought Electronic Data Systems for $13 billion and just two weeks following Dell’s announcement that it is buying Perot Data Systems for $3.9 billion. Large vendors have been scouting for acquisition targets that complement their existing product lines with services that provide recurring revenue streams. HP and Dell’s acquisitions were designed to bolster their respective storage and data center businesses as well as provide better competitive positioning against IBM’s Global Services division, the market leader in enterprise services.

Based in Dallas, ACS is one of the largest technology services and integrators in the industry. It boasts more than 74,000 employees, providing it with a global reach in servicing multinational enterprises and governments. ACS generates more than $6.5 billion a year in gross revenue, of which 15 percent is recurring revenue. The company primarily competes against HP Services (formerly EDS), IBM Global Services, Computer Science Corp. and others.

ACS is the largest acquisition in Xerox’s history and will transform the company founded on document management to one with capabilities in financial services, business process and operational management, custom application development, IT outsourcing, and systems integration. With ACS’ revenues included, Xerox will be a $22 billion company, of which 77 percent of its revenue will be recurring.

"When ACS was founded, we had a vision of becoming a best-in-class company by working harder than our competitors. More than 20 years and 74,000 employees later, as the world's top BPO company, we have now found a partner to help us reach even greater heights," said Darwin Deason, founder and chairman of ACS, in a statement. "This is a tremendous outcome for our shareholders driven by the commitment of a strong management team and incredibly dedicated employees."

The acquisition requires approval by both Xerox’s and ACS’ boards. Shareholders stand to receive $18.60 cash per share and the balance of the value in Xerox stock. The acquisition is expected to close in the first quarter of 2010.

ACS is the second large acquisition of a solution provider or integrator by Xerox. In 2007, Xerox bought Tampa, Fla.-based Global Imaging Systems for $1.5 billion. That deal gained Xerox a greater share of the SMB printer and imaging marketplace serviced by Global Imaging plus capabilities in data networking integration.

Lawrence Walsh Lawrence Walsh is editor of Baseline magazine, overseeing print and online editorial content and the strategic direction of the publication. He is also a regular columnist for Ziff Davis Enterprise's Channel Insider. Mr. Walsh is well versed in IT technology and issues, and he is an expert in IT security technologies and policies, managed services, business intelligence software and IT reseller channels. An award-winning journalist, Mr. Walsh has served as editor of CMP Technology's VARBusiness and GovernmentVAR magazines, and TechTarget's Information Security magazine. He has written hundreds of articles, analyses and commentaries on the development of reseller businesses, the IT marketplace and managed services, as well as information security policy, strategy and technology. Prior to his magazine career, Mr. Walsh was a newspaper editor and reporter, having held editorial positions at the Boston Globe, MetroWest Daily News, Brockton Enterprise and Community Newspaper Company.

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