Investment Firms Negotiating to Acquire ACS

December 23, 2005 ( - Several investment firms are in negotiations to acquire Affiliated Computer Services (ACS), a technology and human resources outsourcing company.

The New York Times reports that the group of firms is led by the Texas Pacific Group and includes Bain Capital and the Blackstone Group, according to sources familiar with the negotiations.   The deal, for about $8 billion, could be reached as early as next week, but the sources cautioned that several points had yet to be resolved and it was possible that the negotiations could drag on or fall through.

ACS’ core business is providing the data-processing infrastructure required by government and commercial clients to process payrolls, maintain financial records, operate computer-linked customer call centers, handle human resources data and scheduling shipments from suppliers.   Its clients include General Electric and McDonald’s.  

It has also developed its capacity to provide information processing services to the health care industry, and expanded this year by acquiring the human resources operations of Mellon Financial (SeeHR Outsourcing Consolidation Continues with ACS-Mellon Deal).

Domestic and international government contracts have long been a staple of ACS’ client base, but transactions show that the company has been shifting away from federal contracts to focus on state and local governments and commercial clients, according to the Times.   The company operates in more than 100 countries.

In recent months, it has won contracts to develop an Internet-based Medicaid information management system for New Hampshire and to manage the health savings account program for Florida Blue Cross and Blue Shield.

Under the terms of the proposed deal, the group of firms would pay about $62 a share for ACS.