Xchanging’s Procurement Assets: Time to Sell?


As speculation heats up around the potential takeover of Xchanging, a lot of questions remain about its set of procurement assets, which include a traditional procurement BPO business, new capabilities centered on enabling “tail spend” and a sourcing suite that includes spend analytics capabilities. Last night, we featured an interview and analysis with former Xchanging CEO Ken Lever, who suggested the firm “still believes in the potential of the procurement business.”

The potential of that business, however, seems an afterthought to potential acquirers including Capita and Apollo, which are placing primary consideration on the value of the firm’s back-office and automation-related insurance assets. Given this, we would suspect that current or future shareholders would likely find greater value in splitting apart the procurement business from the whole.

With the acquisition of MarketMaker4 (MM4) and subsequently Spikes Cavell, Xchanging made a bold bet on investing in procurement technology and solutions rather than just procurement services and traditional business process outsourcing (BPO). Both of these assets appear to have done well under the Xchanging umbrella. But with increased distribution, there is no doubt they could do even better.

Spend Matters believes that a combination of market dynamics and the management changes and shifts within Xchanging would make it an opportune time to consider placing the procurement assets in different hands in the coming months.

There’s a long list of candidates who might be interested in the assets. And there is precedent for bringing together software and services under a BPO umbrella (outside of just Xchanging) for those that might be skeptical of the combination. GEP, for example, has proven the ability to deliver integrated BPO, consulting and software in procurement.

And with Accenture continuing to build on its dominant procurement BPO market position through continuing to invest in automation and large accounts, the Xchanging procurement assets would no doubt add a meaningful book of business (and customer set) to those looking to compete against the BPO giant. Genpact, in particular, would have much to gain from adding the Xchanging procurement assets into its mix, and would seem a logical suitor.

Alternatively, the Xchanging procurement assets could also form a nucleus from which to build out a private-equity-backed procurement play (and we are aware of a range of PE firms sniffing around the sector looking to make a material play).

Regardless, time matters in this move, as Xchanging procurement customers will no doubt vote their own supply risk considerations if they believe their BPO and software provider of choice is giving secondary consideration to its procurement business — or selling off the broader firm to an acquirer that is not interested in investing in the assets.

Discuss this:

Your email address will not be published. Required fields are marked *