Potential for government business may encourage new Logica bid

CGI's plans to buy Logica as part of a £1.7bn cash deal may tease out an alternative bid for the Anglo-Dutch IT services company. Although Logica's board of directors has unanimously agreed to recommend the acquisition by the Canadian company to Logica's shareholders, some close to government believe other bidders may yet emerge. Indian companies such as Wipro and Infosys have been mooted as potential buyers of Logica to increase their public sector footprint and capability. IBM too has been raised as a possible alternative bidder. From a security perspective, CGI's Canadian ownership of Logica is more likely to get a swifter nod of approval within Whitehall than an Indian buyer. CGI said that Logica's board of directors had unanimously agreed to recommend the transaction to Logica's shareholders. Irrevocable undertakings have been received in support of the transaction in all circumstances from Logica's directors and in certain circumstances from Logica's largest shareholders, it added. Total irrevocable undertakings received represent a total of 18.19% of Logica's outstanding shares, CGI said. John Jones, co-founder of strategic sales architect Landseer Partners, has acted in a series of sales, business development and marketing roles for the UK's larger IT services companies including Scicon (now EDS), Logica and CMG. He said there was a feeling last week that something was afoot. "Normally there is plenty of speculation around Logica but last week, as someone pointed out, it had gone quiet. Too quiet. If CGI clinches the deal – and it's quite possible other bidders may emerge – there will have to be some thought given to how it retains the Logica name. Usually, the acquired company's name stays for a couple of years to maximise the brand's reputation, and then is quietly dropped. That is likely to happen here. "The Logica name has clear recognition in government circles and CGI will want to retain that. There are some excellent people within Logica that CGI will also want to keep, though as is usually the case in acquisitions, the top management will be gone pretty quickly." Geographically, there are considered to be strong synergies between CGI and Logica's businesses. CGI is well established in vertical markets such as government, financial services, telecoms and utilities but remains largely unknown outside its native Canada and Washington DC government business. CGI currently gets only around 6% of its revenues from Europe, while Logica is strong in UK governmental circles and has a strong European focus. The Government Procurement Service (GPS) recently awarded Logica a framework contract for the provision of human resources, payroll and finance services to central government worth £500m , which was regarded by GPS as "another milestone in the government's strategy to centralise procurement, which will deliver significant and sustainable cost reductions for government". CGI may see opportunities from Logica's GPS success to try and sell in its own public sector ERP solutions. The company has SAP and Oracle expertise and says it has successfully implemented more than 400 government ERP systems, managing in excess of $700bn and serve more than 93 million citizens. Chris Pennell, principal analyst at public sector market intelligence firm Kable, said: "Given Logica's footprint across the criminal justice and defence sectors, as well as holding some important BPO contracts across Whitehall, it is entirely possible that one of the Indian pure play providers could view this an opportunity to acquire a footprint from which to expand. Certainly these providers have been disappointed by the lack of BPO opportunities across Whitehall." This article is published by Guardian Professional. For weekly updates on news, debate and best practice on public sector IT, join the Guardian Government Computing network here .