Snubbed by HP, Xerox finds comfort in surprise double merger

Less than two weeks after reluctantly halting its incessant pursuit of HP due to market instability inconducive to large-scale acquisitions, Xerox announced – two large-scale acquisitions.

The company agreed buyout terms with ITEC Connect and Altodigital, two managed services providers (MSPs) based out of the United Kingdom. Financial details of neither takeover were disclosed, whereas both Altodigital and ITEC Connect are set to continue operating as somewhat autonomous Xerox subsidiaries moving forward.

A much-needed show of strength for Xerox

The tie-ups, negotiated independently, are not necessarily a reaction to the HP-shaped failure on Xerox’s spring agenda; both already received regulatory approval in the UK, meaning they’ve been in the works for longer than the tensions between Xerox and HP started escalating, leading to a short-lived but full-fledged proxy war for control of the latter’s board.

Given how British antitrust authorities typically take around four months to greenlight consolidations, it’s to be assumed Xerox has been ironing out the details of the Altodigital and ITEC Connect acquisitions since at least late 2019. That would be even before it announced the first of its recent forays into the MSP segment – the purchase of West Yorkshire, England-based Arena Group.

That isn’t to say the timing of today’s double-merger announcement is accidental seeing how Xerox truly needed a win following repeated public snubbings by HP. Its latest acquisition combo should hence serve as a much-needed show of strength in the aftermath of the HP takeover debacle. Combined with the ongoing COVID-19 pandemic and the global market instability that followed, Xerox saw $3.16 billion of its market value erased since first bidding $35 billion on HP three weeks ago.

The addition of two more major MSPs to Xerox’s portfolio should continue diminishing the company’s obsession with HP. Following these moves, the grandfather of laser printing and photocopying is much better positioned to move beyond its hardware roots and finally secure sustainability in software, something it’s been struggling to do for over a decade. In other words, the temporary defeat Xerox admitted to HP in mid-March may ultimately turn permanent.

HP certainly won’t be protesting this turn of events which provides it with some peace of mind while it redirects its resources toward damage control in response to the global financial carnage stemming from the still-raging coronavirus pandemic. After already snubbing Xerox’s $35 billion tender offer as frivolous and irresponsible, weathering the subsequent proxy storm until the bid was halted, and promising improved dividends to shareholders, HP has its work cut out for it for the remainder of the year.

Still, the technology behemoth demonstrated remarkable resilience in the face of unprecedented aggression from a much smaller, but incredibly bold bidder, adding yet another extraordinary chapter to its 80-year history.

Update, March 27th: In an ice-cold statement, HP confirmed it won’t be giving any more thought to Xerox and what it deems its irresponsibly overleveraged buyout fantasies.

Author: Dominik Bosnjak