CompuCom, Safeguard Poised To Go On Acquisition Trail

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Safeguard Scientifics President and CEO Anthony Craig Tuesday said the sale of the company's CompuCom Systems subsidiary paves the way for both Safeguard and CompuCom to pursue acquisitions to accelerate their growth.

Craig said Scientific will use part of the $128 million in cash from selling its 51 percent stake in CompuCom to buy business decision solutions and healthcare life sciences companies.

As for CompuCom, he said, the service provider's board of directors made the decision to sell to Platinum Equity LLC in order to pave the way for an expansion of its services business through acquisitions.

"CompuCom was concerned about the feasibility of obtaining the equity capital it felt was necessary to support an aggressive IT services acquisition strategy," said Craig. "Consequently CompuCom began to explore its strategic options. As part of this process, CompuCom's financial advisor contacted a number of potential acquirers. The result of this CompuCom initiative is the Platinum acquisition of CompuCom."

Platinum Equity, a $5.5 billion privately held diversified technology investment firm, announced last Friday that it had acquired 17-year old solution provider CompuCom Systems Inc. in an all cash deal valued at approximately $254 million

Craig praised the progress made by CompuCom CEO Ed Coleman in increasing the CompuCom's services business. That said, Craig noted that Safeguard had decided that CompuCom was simply a "non-strategic" holding as the diversified technology holding company plotted a new growth strategy in the wake of the blowout.

At the same time, he said, CompuCom's board of directors was reevaluating its business model including the "capital requirements" needed to continue to migrate from a product business to a full fledged IT services provider.

Safeguard has in the last few years moved to recover from the crash, said Craig, which resulted in a restructuring of its balance sheet and a repositioning in high growth segments. He said the company chose life sciences and business decision solutions sectors because of the prospects of acquiring wholly owned companies that can generate predictable cash flow.

"From a strategic point of view, we have tried to be quite judicious in choosing high growth markets wherein success offers significant financial leverage to give you the rewards of that success," he said. "Beyond this it really becomes a question of execution in the companies that we have."

Craig said the next step for Scientific is identifying and acquiring companies it can add to its portfolio.

Safeguard Chief Financial Officer Christopher Davis said the process of acquiring and building young companies will take several years to pay off.

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