CSC acquires UXC – Boosts Capabilities in Australia


On October 6th US IT services firm CSC announced that it was entering a five week due diligence period to acquire Australian listed IT Services firm UXC. The acquisition price is US$300M, or A$420M. UXC has revenues of just under A$700M, and approximately 3,000 employees.

This transaction will almost double CSC’s revenue in Australia and place it close to Accenture from a revenue point of view in Australia. UXC is, or was, the largest independent Australian owned IT services provider. Whilst UXC has capabilities in other geographies, it is very reliant upon Australia for revenue.

The CSC UXC deal is not a shock. There have been rumors of UXC as a potential acquisition target by global vendors for many years. Most of the legacy vendors have taken a good long look at it over the past few years but clearly could not get the price and integration alignment. Now CSC is clearly confident it has.

As are result, the surprise is that the deal took so long. Unless there is another bid or some other major market disruption, it is reasonable to expect that UXC shareholders will accept the bid.

At a corporate level CSC is trying to rebuild its identity post their split in the US with its US Public Sector group. The shift towards cloud and the as a service economy has placed significant pressure on the CSC business globally and in Australia. It has divesting non-strategic elements of the business, (eg in 2012, the Australian recruitment business Paxus) , so the acquisition to acquire the UXC strengths is not a surprise as the realignment slowly continues.

The decline over the past two years of the Australian dollar would have changed the economics of acquiring UXC for a US based organization, particularly if there are capabilities that can be leveraged globally. CSC gains capability improvement in several areas. UXC has a strong Oracle, SAP and Microsoft offering. It has strengths in government, particularly at the state level that will be attractive to CSC. Due to UXC having separate brands operating in a federation model, the brands of the business have high visibility in the market, adding to their attraction.

The acquisition also show that whilst the Australian market does not have the growth numbers from a percentage value of other Asian markets, it does have several attractive elements for that make local investments well worth the time. The level of skill demand in the market is at a premium, as is engagement relationships that independent vendors have with a range of customers. Furthermore the size of the Australian market is large enough that even smaller growth numbers can provide significant increases in market opportunity from a dollar perspective in comparison with smaller AP markets.

CSC and UXC will have to focus on what could be an interesting integration process. CSC is a well established conservative organization. UXC operated as a federated company. The various subsidiaries that have been acquired over the years kept their own identities and in some cases were effectively encouraged to compete against each other. Whilst UXC was moving to operate in a more integrated model, the independent approach will be compromised with the ingestion to CSC.

Now the focus will be if the likes of HP and Fujitsu show an interest in some of the remaining Australian firms. Whilst there is not a plethora of available firms to acquire, if these firms are to maintain or enhance their market position, inorganic growth in Australia or globally may prove to be essential.

Focus Point

If the CSC transaction with UXC is completed, then it will reshape a significant part of the Australian IT Services marketplace. CSC will get strength in key market areas such as SAP and Microsoft and will be integrating a strong set of both customers and skills from the employee base of UXC. This is proof that even mature markets such as Australia have strong opportunities for growth in scale if vendors are able to be aggressive in the market.

As with every acquisition, most of which are a major struggle is to get the integration of culture and capabilities correct and do this at speed. If CSC/UXC can do this it will be great for employees, clients and partners. If not, it will join the overly long list of troubled acquisitions.

If you require further information, please contact Phil Hassey, Founder capioIT. capioIT is an advisory firm focused on helping organisations to understand emerging technology as the world becomes Digital. Phil may be contacted by email below,

phil@capioit.com

About capioIT - Phil Hassey

capioIT is an advisory firm focused on helping organisations to understand emerging technology in emerging markets. CEO Phil Hassey established the company in 2010
This entry was posted in Uncategorized and tagged , , , , , , , , , , , , , , , , , . Bookmark the permalink.

2 Responses to CSC acquires UXC – Boosts Capabilities in Australia

  1. Pingback: When a merger is an acquisition CSC “Merges” with HP Enterprise Services | capioIT – Trusted Advisors in Emerging Technology

  2. Pingback: ANZ is the guide for where DXC Technology Needs to Go | capioIT – Trusted Advisors in Emerging Technology

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s