Japan’s NTT Data is to acquire Dell’s IT Services business for $3.06 billion, in an effort to bolster its footprint in the North American region.
The announcement confirms speculation over recent months as to the future of the IT Services division, as Dell has been rumoured to be searching for a buyer for the business unit to aid financing of the EMC deal. Dell Services was initially formed through the acquisition of Perot Systems in 2009 for $3.9 billion. The new agreement with NTT Data will see Dell absorb an $800 million loss on the division and could indicate that financing the EMC acquisition is more difficult than initially expected.
In December, BCN reported Dell had been facing challenges in financing one of the biggest financial deals in history. For the $63 billion EMC acquisition to proceed, Dell has had to reduce its levels of debt with the Perot Systems business unit rumoured to be a favourite for sale.
The company will initially remain under the leadership of Suresh Vaswani, current President of Dell Services, who will continue to report to Dell CEO Michael Dell until the completion of the deal. It is believed that as part of the acquisition NTT Data will take on 28,000 Dell employees, though future leadership of the business has not been confirmed.
“NTT Data is pleased with the unique opportunity to acquire such high-calibre talent, and a corporate culture that shares common values with NTT Data, with emphasis on client first, foresight, teamwork and a commitment to innovation,” said Toshio Iwamoto, President and CEO of NTT Data Corporation. “Welcoming Dell Services to NTT DATA is expected to strengthen our leadership position in the IT Services market and initiates an important business relationship with Dell.”
NTT Data’s acquisition of the IT services division is the largest by the company to date and continues to bolster its North American footprint. Revenues for NTT Data in overseas markets has more than doubled since 2011 and in the same period the company has spent more than $600 million on acquisitions. The company has prioritized growth in the North America region, primarily targeting lucrative contracts in the healthcare, banking, financial services and insurance.
Since 2011 NTT Data has been proactive in bolstering its overseas business with a number of acquisitions throughout the world. In Europe it acquired companies including Everis and Value Team, in North America Optimal Solutions Integration and Carlisle & Gallagher were added, whereas iPay88 increased the company’s footprint in Malaysia.
“There are few acquisition targets in our market that provide this type of unique opportunity to increase our competitiveness and the depth of our market offerings,” said John McCain, CEO of NTT Data. “Dell Services is a very well-run business and we believe its employee base, long-standing client relationships, and the mix of long term and project-based work will enhance our portfolio.”
The deal could indicate that financing the EMC agreement has proved to be more difficult than initially expected. Dell Services as a business unit was reportedly to be valued in the region of $5 billion, which could highlight Dell’s urgency in completing the sale. If reports are correct, it would appear NTT Data has negotiated a good deal.