CSC Makes Minority Investment In Microsoft U.K. Partner Of The Year

Systems integration giant CSC has taken a minority stake in eBECS Ltd., the 2016 Microsoft country Partner of the Year for the United Kingdom,

As part of the investment, eBECS, which has offices in the UK, Saudia Arabia, Ireland and the United States, will be licensed as an exclusive delivery partner for CSC's global Microsoft practice UXC Eclipse,

Under the pact, eBECS, which offers services around the full Microsoft business solutions stack, will provide Microsoft Dynamics Business Solutions within the United Kingdom, the Kingdom of Saudi Arabia, and other areas of EMEA (Europe Middle East and Africa) and North America. Terms of the investment were not disclosed.

Martin Wolf, president of martinwolf M&A Advisors of Walnut Creek, Calif., which advised CSC on the deal, said the deal bolsters CSC's already robust Microsoft business solutions capabilities. "CSC is ahead of the game in the Microsoft business applications space," said Wolf. ""This is a very compelling market with businesses like eBECS growing in the 20 to 25 percent plus range."

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The CSC minority investment has some of the aspects of a private equity investment opening the door for eBECS management to grow the value of the business, while leveraging the global scale of CSC, said Wolf. "This is a very good, creative way to start a business relationship," he said.

Given the history of such minority investments in the technology services industry, it could also be a precursor to an acquisition. CDW, for example, took a minority investment in Kelway, one of the top United Kingdom resellers in 2014, and then ended up acquiring the company in 2015.

The deal comes even as CSC moves to cut costs ahead of its blockbuster merger slated to close next April with Hewlett Packard Enterprise creating a $26 billion global services powerhouse.

Wolf said he sees HPE's $18 billion services business as much more valuable as part of CSC. "When you combine HPE Enteprise Services with CSC it is a different animal," he said. "They will do much better with CSC than as part of a product centric company."

[Related: CSC CEO: We're Not Waiting To Make Improvements, Restructuring Ongoing Ahead Of HPE Enterprise Services Merger]

’As a CSC Strategic Affiliate, eBECS will expand our leading Microsoft practice, giving us the local depth and global reach to service Microsoft-centric projects and our clients world-wide,’ Jim Smith, executive vice president and general manager of CSC's Global Business Services, unit said in a statement.

Kevin Hall, chief executive officer of eBECS, said his company's customers "will have the certainty of a long-term business partner with the skills, experience and infrastructure to deliver a new era in customer service to the Microsoft ecosystem. Our partnership with CSC also extends our ability to offer our services world-wide as true global systems integrators.’

The deal will build out delivery capabilities for both eBECS and UXC, as both focus on delivering end-to-end business management solutions based on Microsoft technologies, including Microsoft Dynamics 365 and Microsoft business solutions delivered on premise or in the cloud.

UXC Eclipse is already Microsoft Dynamics Gold Partner that has 600 employees stationed across 14 offices in Australia, New Zealand, Fiji, Canada and the United States.

The deal itself comes only days after CSC announced that it will be taking on additional restructuring costs in its current quarter as it continues to augment its business leading up to the final merger of itself and HPE Enterprise Services.

On Thursday of last week, during the company's latest quarterly earnings call, CSC CEO Mike Lawrie said HPE ES and CSC have committed to $1 billion in cost synergies in their first year as a combined entity.

CSC announced it is merging with HPE ES back in May, creating the third largest solution provider in North America with about 5,000 clients across 70 countries.

Additional Reporting By Steven Burke