Texas Pacific, Blackstone and Bain, three private equity funds are said to be discussing taking ACS private, after talks with CSC fell apart.
The deal will likely be at 2X revenues. They are buying a company with an impressive growth rate over the last decade and almost 10% better margins than CSC, which would likely have been valued at less than 1X. While ACS looks twice as pricey, if they can increase the ACS revenue growth up from 25% last year, and if gross margins can be improved from 33% last year to the 40s...the valuation could be closer to the 10X that Infosys, Wipro and Cognizant command.
Texas Pacific hired Vivek Paul from Wipro earlier this year. They are also said to be leading the consortium. The formula seems predictable...the question is why is ACS not doing it on its own? Or why CSC management does not execute to it to get its valuation up significantly?
