Even more so than in other vendor relationships, CIOs watch closely the health of their outsourcing providers, since they're so dependent on those companies' day-to-day strength. Customers can't be thrilled at the brawl going on at ACS over a failed private-equity buyout, which has led to five board members resigning.
Even more so than in other vendor relationships, CIOs watch closely the health of their outsourcing providers, since they're so dependent on those companies' day-to-day strength. Customers can't be thrilled at the brawl going on at ACS over a failed private-equity buyout, which has led to five board members resigning.The Journalbroke the story on the tensions, caused by an insider -- founder, chairman, and largest shareholder Darwin Deason -- leading an effort to take the company private. The Times has this story on the resignations. A proposed buyout by Cerberus fell through amid the credit crunch. The Journal explains:
ACS management, along with some of its biggest shareholders, including Oppenheimer Funds, blamed the independent directors for allowing the deal to slip out of their hands -- by refusing to set a vote on the bid before pursuing alternatives. The directors say they had a duty to look for other potential bidders, given that Cerberus's proposed deal included the participation of ACS's chief insider: company founder Mr. Deason ...
The article compares the responses to a "back-alley smackdown."
From Mr. Deason's letter:
The Board has lost shareholder trust due to its failure to permit the shareholders to vote on the Cerberus offer and its failure to explain its actions and directly respond to shareholder comments to date. … Clearly, changing the membership of the Board is in the shareholders' best interests, as it will put the existing controversies behind the Company and give the Company a fresh start.
From the Board's "Dear Darwin" response letter:
We must look after the minority shareholders -- even if it means you cannot get the deal that is most advantageous to you personally. From the outset, you have attempted to subvert the process in order to prevent superior alternatives to your proposal from being consummated.
It all culminated with one of the oddest lines you'll ever read in a press release:
ACS is pleased that the company's independent directors have agreed to resign.
CIOs know better than to panic during these dustups, since the pros who work on their projects tend to keep their heads down and do their jobs. HP survived its boardroom blunders just fine. But it's a distraction IT execs would just as soon live without.
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