09.21
The IT services sector continues to consolidate, with another major
hardware vendor, DELL, announcing Monday an offer to buy Perot Systems
for roughly $3.9 billion – a 68% premium to Friday’s close and a valuation of
1.5x sales and 12x EBITDA (vs. CGI at 1.0x and 6.0x, respectively).
This acquisition mirrors HP’s acquisition of EDS in 2008 for an enterprise
value of $13.9 billion – a larger transaction but at a smaller premium (33%)
and valuation (0.6x sales, 5x EBITDA). The acquisition more than doubled
HP’s services business from ~$16 billion to current $34 billion.
The motivation for both acquirers (i.e., DELL and HP) was to diversify a lowmargin,
hardware-intensive business into higher value/margin IT services,
leveraging customer relationships. DELL’s latest quarterly revenues were
down 22% y/y given market conditions.
For CGI, implications are mixed. On the positive side, Perot’s acquisition
suggests that CGI could command a premium if acquired (although
management’s multi-voting shares are an impediment). The negative is that
CGI is itself looking to acquire – and this may now be more expensive.
No Comment.
Add Your Comment