Xerox announced an agreement Monday under which the document technology giant will acquire business process outsourcing (BPO) firm Affiliated Computer Services. The $6.4 billion cash and stock deal, which already has been approved by both companies’ boards of directors, is expected to close in the first quarter next year.
Xerox CEO Ursula Burns called the deal a “game changer” that will help the company dramatically expand by combining its strengths in document technology with the expertise of ACS in work-process management and automation. “Through our strategic initiatives, it became clear that the BPO market is well aligned with our business and a key driver of long-term growth,” Burns told investors.
With its acquisition of ACS, Xerox will become a $22 billion global company, of which $17 billion is in recurring revenue — a significant boost to the annuity stream, Burns said. “The revenue we generate from services will triple from $3.5 billion in 2008 to an estimated $10 billion next year,” Burns said.
A $150 Billion Market
ACS automates paper-based work processes and provides specialized BPO and information-technology services to a wide range of industries, including telecommunications, retail and financial services, health care, education and transportation. The acquisition will enable Xerox to target the $150 billion BPO market, which the company said is growing at five percent a year.
“Customers are increasingly seeking service providers that offer a full range of solutions — from their document technology to the process management in their back and front office operations — and large enterprises require global capabilities and global account management,” Burns told investors. “That is exactly what we will deliver by expanding Xerox’s portfolio of document technology and services to include the BPO capabilities of ACS.”
Burns said ACS is the largest provider of managed services to federal, state, county and local governments…