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Xerox acquisition is good news for Latin America

Tom Blodgett

Executive VP/Affiliated Computer Services, ACS

Published  Friday, October 9, 2009

There has been quite a bit of merger and acquisition activity in the services sector in Latin America in the past months, and on a much larger scale on a global level as well, as evidenced by the acquisition of EDS by HP and the recent announcement by Dell that it is buying Perrot Systems. The latest in the industry was US printing solutions provider Xerox scooping up compatriot BPO services provider Affiliated Computer Services, ACS, in a deal estimated at some US$6.4bn.

Prior to the acquisition announcement, ACS itself was buying up companies in the region, looking particularly in Brazil and forecasting a new purchase before the second quarter of 2010. The company had already acquired Multivoice and e-Services to expand its presence in Latin America.

To learn more about how the Xerox acquisition will impact the Latin American market and what will happen with ACS's expected further M&A activity in the region, BNamericas spoke to ACS executive VP Tom Blodgett.

BNamericas: What do you think will be the main impact of Xerox's acquisition of ACS in the Latin American market?

Blodgett: With the Xerox announcement on Monday [Sep 28], we were aggressively looking at additional companies to acquire in Latin America. Although it is quite early in the process, there are five or six companies we are focusing on to acquire, primarily in Brazil.

When we acquired Multivoice we gained a significant presence in Latin America, but not as much in Brazil, so we think we need to be bigger in Brazil. Right now we're in the early stages of an acquisition in Brazil which has been put on hold while we work through the Xerox acquisition, but at some point in the future we will restart those discussions and look at the potential in Latin America for further M&A activity.

BNamericas: So you predict your M&A strategy in Latin America could speed up?

Blodgett: Yes, even if the acquisition takes place. There is a short period of time, which might mean about 12 months, that we will need to get the merger done, kind of get it digested a bit and once that happens, we actually anticipate that our acquisition activity will accelerate because there will be more resources, more cash available for acquisitions, because of what Xerox has.

BNamericas: And so this announcement is actually good news for the Latin American markets?

Blodgett: This is definitely good news for Latin America. We had a good experience with the Multivoice acquisition and so once again we were taking the initial steps of looking for an additional acquisition. But that process will be put on hold while we get through this major change with Xerox.

This is good news for Latin America in terms of our presence and ability to grow and scale. We will have more people in more countries in Latin America that will allow us to grow faster because we will leverage their infrastructure, brand and customer relationships to help us grow.

BNamericas: Xerox is not the first company moving from the hardware to the services business, why do you believe Xerox is also taking this step, having selected ACS?

Blodgett: Xerox's internal strategy is to move from a one-time transaction company to recurrent revenue and they have done a very good job starting that transition. Today, 75% of their revenues come from after-sale activity. Xerox is a US$15bn-16bn company, and they are very good at technology and innovation. We are excited about leveraging those areas in which Xerox is very good at, their global footprint, R&D activity, and their size and scope.

On the other hand, ACS is very good at business process optimization - taking over business processes and making them more efficient. So we think there's a very good marriage: we can take advantage of their technology, their global footprint and their expertise in document management to help us in what we are trying to accomplish, and help both companies grow.

BNamericas: Is there a specific ACS business area that will grow as a result of this acquisition?

Blodgett: We're anticipating all areas of business will grow because we're planning on leveraging the customer relationships they have. Xerox is one of the best known brands in the world, they've had lots of good customers for several years, and they relate with customers at a high level.

So we plan on leveraging that relationship to get an opportunity to sell all of our services, whether it's human resources, finance and accounting, customer care or transactional work.

BNamericas: Do you believe the services industry consolidation will continue?

Blodgett: The one-time revenue companies are looking to diversify with more services, HP-EDS, Dell-Perrot Systems and now Xerox-ACS, only we believe this [last acquisition] is different.

Those others, we believe, were trying to expand their presence in the datacenter. EDS was a big player in technology and infrastructure in the datacenter, and the same thing would be true with Perrot. But we are more in the BPO segment, so rather than adding more datacenter capability this is an addition of a new capability that Xerox doesn't have.

And we believe we can accelerate our growth based on Xerox's strengths. Those operations were datacenter driven, this one is BPO driven.

BNamericas: When do you estimate the acquisition will take effect?

Blodgett: We will become part of Xerox during calendar year 2010, if things go well.

ABOUT THE COMPANY:

Headquartered in Dallas, ACS has 74,000 professionals supporting thousands of multinational corporations and government agencies in over 100 countries. The company offers business process outsourcing support in areas that include finance, human resources, information technology, transaction processing and customer care.

In Latin America, the company has presence in Chile, Argentina, Peru, Colombia, Guatemala, Mexico, Jamaica, Brazil and the Dominican Republic.

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