Dell sells services business for $3B
After seven years of trying to build a services business that would challenge Hewlett-Packard and IBM, Dell Inc. has decided sell Dell Services to NTT Data in a deal valued at $3.05 billion.
The business is primarily the Perot Systems business Dell bought in 2009 for $3.9 billion. Yes, that's a nearly $800 million drop, but not a surprise.
Dell has been in the midst of a turnaround and retooling for several years and went private in 2013 when founder Michael Dell and Silver Lake Partners acquired the company’s outstanding shares.
Where the services business fit at Dell was often speculated about and talk of its sale increased after Dell announced it was acquiring EMC for $67 billion. That deal will close later this year.
Until the EMC acquisition, buying Perot was Dell’s largest acquisition. But the company was an active acquirer nonetheless, making deals for companies in the cloud, security and storage space as well as systems management and dashboard technologies.
While the services business, which focused on delivering cloud and business process outsourcing services, benefited from the acquisitions, services were not seen as a driver in any of the acquisitions. The services business always seemed to be this other thing at the company and not a central focus.
With NTT Data, services will be front and center, and the deal gives the Japan-headquartered company a stronger U.S. footprint.
In its announcement, NTT said that the acquisition will help it focus on health care, financial services, insurance and the public sector. The acquisition also increases NTT’s infrastructure services capabilities.
“NTT DATA is pleased with the unique opportunity to acquire such high-caliber talent, and a corporate culture that shares common values with NTT DATA, with emphasis on ‘Clients First,’ ‘Foresight,’ ‘Teamwork,’ and a commitment to innovation,” Toshio Iwamoto, president and CEO of NTT DATA Corp. said in a statement.
John McCain, CEO of NTT DATA Inc., the company’s U.S. business, will lead acquisition effort and will lead the combined companies.
The deal will close after clearing regulatory approvals.
Wells Fargo Securities acted as lead financial advisor to NTT DATA Inc. J.P. Morgan Securities LLC and Credit Suisse Securities (USA) LLC also acted as financial advisors to NTT DATA Inc. Citigroup acted as lead financial advisor to Dell Inc.
Posted by Nick Wakeman on Mar 28, 2016 at 9:28 AM