KUHN CAPITAL Monday, March 19, 2018
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Should EDS Sell AT Kearney?

March 5

We don’t indulge much in deal speculation, but the case for EDS selling AT Kearney looks pretty compelling.

In fact, since EDS bought Kearney in 1995 we’ve struggled with the logic of the $300 million purchase. Despite efforts to the contrary, the two firms continue to operate rather separate businesses, EDS in IT business process outsourcing (BPO), Kearney in general management strategic and implementation consulting. These circles only partially intersect

While blessed with an illustrious history of pioneering BPO business models, EDS is now in an all-stations battle with cheap, high-quality offshore BPO competitors like the Indian firms Tata, InfoSys and Satyam.

To reverse its two years of losing sales and money, EDS must focus and if necessary, follow its competitors overseas. Kearney would seem to be a distraction to this mission, and besides, selling it may bring in some cash needed for the larger war. Along these lines, rumors have it that EDS has asked Kearney partners to examine the prospect of a management buy-out valued at about $600 million, this after the parent failed to attract outside buyers.

For its part, in the past EDS has not hesitated to sell “non-core” assets: last May it divested GS PLM Solutions, a provider of product lifecycle management software to a group of private equity firms. What makes exiting Kearney a bit dicier, however, is the fact that it is both a consultancy (hard businesses to sell) and losing money itself.

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