Apollo Global and Kyndryl Holdings in Talks to Acquire DXC Technology

Buyout firm Apollo Global and Kyndryl Holdings, the IT services provider spun off from IBM, are reportedly in discussions about a joint bid to acquire DXC Technology, according to sources familiar with the matter.

Key Highlights:

• Potential Offer: Apollo and Kyndryl have discussed an acquisition offer for DXC Technology priced between $22 and $25 per share. Following the news, DXC shares surged by 11%, closing at $18.45 in New York trading, which values the company at $3.3 billion.

• DXC's Market Position: DXC Technology offers a range of IT services, including analytics, engineering, cyber security, cloud infrastructure, and outsourcing. Despite its comprehensive offerings, DXC has faced revenue declines over the past year due to high interest rates and economic slowdown fears, leading corporate customers to reduce spending. This has resulted in a more than one-third drop in its share value over the last 12 months.

• Strategic Moves: In response to financial pressures, DXC has implemented cost-cutting and restructuring initiatives. The company is also seeking bids for its insurance software business, valued at over $2 billion, which could influence its decision to remain independent under CEO Raul Fernandez, who took on the role in February.

Background:

• Past Sale Discussions: DXC previously engaged in sale discussions last year, but these talks ended after a private equity suitor could not secure the necessary financing.

• Current Negotiations: Sources have indicated that the matter is confidential, with no official comments from DXC, Apollo, or Kyndryl.

Industry Context:

DXC's challenges reflect broader industry trends where IT service providers are adapting to fluctuating demand driven by macroeconomic conditions. High interest rates and cautious corporate spending are common themes impacting the sector.

Conclusion:

Apollo Global and Kyndryl Holdings' interest in DXC Technology underscores the value seen in DXC's diverse IT services despite its recent financial struggles. The potential acquisition could reshape the competitive landscape, depending on the final bid and DXC's strategic decisions moving forward.

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