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Author: Katharina Grimme
Investment company General Atlantic announced last week that it wants to sell its 74.1% share in German IT Service player TDS, and has started to look for buyers. General Atlantic was involved in TDS's IPO in 1998 and acquired a majority stake in 2003. TDS has 720 staff and generated revenues of €93m and a gross profit of €26.5m in 2005. Clients include motorway service station chain Autobahn Tank & Rast, Bankgesellschaft Berlin, Burger King, Citibank, Daimler Chrysler Bank.
Comment: Market insiders have talked about a sell-off of TDS for quite a while. TDS hopes that a new majority shareholder will continue to support (and invest in?) TDS's position as IT outsourcer, IT consultant and HR service provider for the German mid-market. It can be expected that the buyer will be a service provider (rather than an investment company) that will integrate the business into its own operations.
TDS could be attractive to a larger international player - possibly even an offshore player- wanting to strengthen its foothold in Germany and in the mid-market segment. The company has long suffered from the dip in the German project services market, as well as from sub-scale international operations. Over the past few years, a reorientation with greater focus on outsourcing and on HR BPO has helped to improve the financial situation so that TDS was finally back in the black in 2005.
The challenge for any buyer will be to integrate the mid-market organisation into a larger organisation, typically focused on the corporate sector. Several companies, such as HP with Triaton, IBM with Rheinmetall, have tried this in the past - with mixed success. We will provide an update as soon as there are news about the bidders.
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