Xerox brandishes $100m M&A warchest

As firm gears up to split into two by the end of the year, CEO talks up plans to continue acquisition strategy

Xerox plans to spend up to $100m on M&A activity this year to flesh out its business process outsourcing business (BPO) ahead of its corporate split, CEO Ursula Burns said on a recent earnings conference call.

"We still have $100m in our plan for M&A, fairly modest plans for 2016," she said. The fund will be directed at "small tuck-in acquisitions" in document technology and services "if we can find them in the areas that are important for us", Burns noted.

The CEO said she wanted to be "very clear" that acquisition is a key part of Xerox's strategy to grow its BPO business, both pre- and post-separation.

"It is a business that had to acquire to fill out capabilities and to grow revenue and that will continue to be the case as we move into the Conduent business," she said.

Meanwhile, Xerox has lowered the pre-tax costs it expects to incur from the corporate separation to between $175m to $200m from the earlier estimate of $200m to $250m.

The vendor expects to incur between $40m and $50m in tax-related separation costs next year, Burns said. In addition, the company expects costs associated with the lack of efficiencies to run to $40m to $50m.

Those costs are expected to be offset by the $700m in annualised savings in 2016 and $2.4bn in total cost savings over three years Xerox expects the split will deliver, the vendor noted.

For Q2, Xerox posted GAAP EPS from continuing operations of $0.15 on a four per cent dip in revenue to $4.4bn.

Its services business produced a two per cent slide in revenue to $2.5bn, while its document technology unit generated sales of $1.8bn for a seven per cent downturn.