EDS Corp.’s acquisition of Saber Corp. in November was one of the largest state and local acquisitions in recent years and is comparable to other market-changing acquisitions.
Affiliated Computer Services Inc. vaulted into the top ranks of state and local integrators in 2001 when it bought Lockheed Martin IMS for $825 million.
And Northrop Grumman Corp. substantially boosted its state and local sales through the acquisition of TRW Inc. the following year for $7.8 billion.
In some respects, EDS’ purchase of Saber recalls CGI Group Inc.’s acquisition of Fairfax, Va.-based AMS Inc., said Rishi Sood, a research vice president at Gartner Inc. CGI bought AMS’ commercial and nondefense U.S. government work in a deal valued at about $443 million, and CACI International Inc. purchased AMS’ defense and intelligence assets for about $415 million.
“CGI established itself with a key beachhead to get [information technology] outsourcing in the U.S. state and local market,” Sood said. “They are now bidding on these deals.”
In a similar turn, the Saber acquisition will give EDS a strong presence in the human services sector, he said.
The Portland, Ore., company has extensive experience integrating systems for eligibility; workforce; and child support, care and welfare programs. The acquisition will let EDS not only handle transaction processing but also compete for modernization projects, Sood said.
“It’s a great example of what two vendors can do to broaden their footprint in the [state and local] marketplace,” he added.
EDS’ business apart from the health care market previously consisted of tax and revenue and criminal justice offerings, and Saber targets agencies and programs that receive federal funding, such as motor vehicle departments, elections, public retirement and unemployment insurance, said Nitin Khanna, chief executive officer of Saber Government Solutions.
When the companies combine EDS’ state and local business with the Saber business, “we actually get more lines of business without any overlap,” Khanna said.
Having a parent company with deep pockets will help the new Saber unit take on projects it previously shied away from either because the financial requirements were too great or it did not have business process outsourcing capabilities.
“Saber was leaving a lot of money on the table in terms of hosting,” Khanna said. “We now have the opportunity to be able to bring all of the services and solutions that EDS has to offer to Saber customers as well.”
