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How Can the Merger with HPE’s Enterprise Unit Benefit CSC?

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Jun. 2 2016, Published 6:31 p.m. ET

Industry leadership

As we saw in the previous part of this series, Computer Science Corporation (CSC) recently announced a merger with the Enterprise Services segment of Hewlett-Packard Enterprise (HPE).

The merger will create a company with $26 billion in annual revenue. This would create the third-largest IT services business in the world after US-based (SPY) IBM (IBM) and Accenture (ACN).

This merger will create a vertical leader in priority industries including insurance, transportation, financial services, pharma, and healthcare. The merged company is poised to lead in the digital transformation space with $3 billion in next-generation offerings.

The merger provides both companies with the capital capacity to invest and grow in the long term with an investment-grade capital structure and a strong free cash flow profile.

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Cost synergies of $1 billion

The merger of the two businesses is expected to produce first-year synergies of $1 billion. HPE believes this merger could provide opportunities for additional synergies in subsequent years as well.

HPE’s CEO, Meg Whitman, stated that Mike Lawrie, the current head of CSC, will serve as the chairman and CEO of the new company. Whitman will serve on the board of the new company.

Whitman added that Mike Nefkens, the current executive vice president and general manager of Enterprise Services, “will become a key part of the new company’s executive team and partner closely with Mike Lawrie on building the new organization.” The transaction is expected to be completed by March 31, 2017.

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