Atos’s Xerox buy is no Bull

Contact: Scott Denne

France-based outsourcer Atos reaches across the pond with the $1.1bn pickup of Xerox’s IT outsourcing (ITO) business. The purchase price values the target at 0.7x 2014 revenue, which is above Atos’ norm. The outsourcing and managed services provider has been a bargain hunter in its biggest acquisitions. In fact, you have to go all the way back to 2003 to find a deal where it paid 0.5x trailing revenue – everything disclosed since then has been below that.

For its last big buy – France-based hardware maker and outsourcing shop Bull – Atos paid $847m, or an enterprise value of 0.3x revenue. Before that it ponied up $1.1bn for Siemen’s ITO unit, valuing the target at a mere 0.2x revenue (on top of that it took cash from Siemens to cover the cost of lost contracts, delayed projects and layoffs).

All that’s not to say Atos wasn’t shopping carefully with this transaction. For one thing, Xerox’s ITO business posted revenue growth in the high single digits in each of the past three years, unlike those earlier purchases. Also, the multiple it’s paying for Xerox’s ITO unit is just a hair lower than the 0.85x median multiple on similarly sized ITO deals over the past 24 months, according to The 451 M&A KnowledgeBase. Finally and most importantly, Xerox brings Atos into the US market in a big way. Nearly all of Xerox’s ITO customers are in North America, whereas only 7% of Atos’ business comes from that region.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.