Capgemini supports Office Depot with IT integration

04 February 2015

Office Depot has hired Capgemini to support the firm with post-merger integration support in the field of finance and accounting and IT. The new contract comes on top of the existing relationship between the two firms – Capgemini has been a trusted partner of the office supplier since 2011.

With more than 66,000 employees across the globe, Office Depot is one of the largest global providers of office products and services. The company was formally established in November 2013, following the merger of Office Depot and OfficeMax. As part of the merger, a massive integration programme was launched with the ambition of realising a $400-$600 million annual synergy (end-state). With an estimated total merger cost of roughly $2 billion*, Office Depot expects to break even by 2017, and then reap the benefits of what is one of the largest mergers in the history of its industry.

Capgemini supports Office Depot with IT integration

To guide the post-merger integration to a good end, a special programme team has been erected, which based in the US leads the integration planning and delivery, and the benefit tracking. For to functional areas, finance & accounting and IT, Office Depot has called in the expertise of Capgemini, one of the globe’s top-10 providers of consulting and technology services. The business advisory firm has been tasked with supporting the standardisation of Office Depot’s finance and accounting operations, and contributing to the integration of the company’s legacy IT systems. In addition, Capgemini will provide testing services for more than 70 IT merger-integration projects, supported through the delivery of a to-be established ‘Testing Center of Excellence’.

Asked for why Capgemini was chosen out of a number of competitive bids, Office Depot CIO Todd Hale points at “Capgemini’s deep retail industry expertise” and its “proven track record of transformational migration projects”, complementing the already satisfactory relationship between the two. “We knew that its team and services aligned well with our business roadmap.”

Christopher Stancombe, member of the Group Executive Committee at Capgemini, says on behalf of his firm that Capgemini is “excited” to expand its mandate at Office Depot, and is convinced that his team can deliver what it takes to accelerate value realisation. Ted Levine, global sector leader, consumer products & retail at Capgemini, adds: “Our teams’ diverse range of expertise, together with the breadth of services we can deliver, positions us well to help Office Depot drive maximum value from its recent merger as it embarks on this important new phase in the company’s history.”

Capgemini - General

BPO deal extended
The deal between the two parties comes on top of an already existing contract. Since 2011 Capgemini has been working with Office Depot to streamline its end-to-end finance processes, including business process outsourcing services, a relationship which initially ran up to 2016, but now has been extended until 2020.

* Office Depot incurred $200 million in one-time operating costs in 2013 related to the merger, and forecasts spending up to an additional $400 million in integration costs and approximately $200-$250 million in capital spending between 2013 and 2016 in order to realise the business case.


8 tips for successfully buying or selling a distressed business

18 April 2019

Embarking on the sale of a business is one of the most challenging experiences a management team can undertake. Even serial dealmakers acknowledge that the transaction process can be gruelling, exposing management to a level of scrutiny and challenge through due diligence that can be distinctly uncomfortable.

So, to embark on a sale process when a business is in distress is twice as challenging. While management is urgently trying to keep the business afloat, they are simultaneously required to prepare it for scrutiny by potential acquirers. Tim Wainwright, an experienced Transactions Partner with Eight Advisory, says that this dual requirement means sellers of distressed businesses must focus on presenting their business in a way that supports buyers in identifying value, whilst simultaneously being open about the causes of distress. 

According to Wainwright, sellers of distressed businesses should focus on eight key aspects to ensure they are as well prepared as possible:

  • Cash: In a distressed situation cash truly is king. Accurate forecasting and day-by-day cash balances are often required to ensure any buyer is confident that scarce cash reserves are under proper control. 
  • Equity story and turnaround plan: Any buyer is going to want to understand the proposed turnaround strategy: how is the business going to enact its recovery and what value can be created that means the distressed business is worth saving? Clear presentation of this strategy is essential.
  • The business model: Clear demonstration of how the business model generates cash is required, with analysis that shows how financial performance will respond to key changes – whether these are positive improvements (e.g., increases in revenue) or emerging risks that further damage the business.  Demonstrating the business is resilient enough to cope with these changes can go a long way to assuring investors there is a viable future.
  • Management team: As outlined above, this is a challenging process. The management team are in it together and need to be consistent in presenting the turnaround. Above all, the team needs to be open about the underlying causes that resulted in the distressed situation arising.  A defensive management team who fail to acknowledge root causes of distress are unlikely to resolve the situation.

8 tips for successfully buying or selling a distressed business

  • Financing: More than in any traditional transaction, distressed businesses need to understand the impact on working capital. The distressed situation frequently results in costs rising as credit insurance becomes more difficult to obtain or as customers and suppliers reduce credit. Understanding how these unwind will be important to the potential investors.
  • Employees: Any restructuring programme can be difficult for employees. Maintaining open communications and respecting the need for consultation is the basic requirement. In successful turnarounds, employees are often deeply engaged in designing and developing solutions. Demonstrating a supportive, flexible employee base can often support the sale process.
  • Structuring: Understanding how to structure the business for the proposed acquisition can add significant value. Where possible, asset sales may be preferred, enabling buyers to move forward with limited liabilities. However, impacts on customers, employees and other stakeholders need to be considered.
  • Off balance sheet assets: In the course of selling a distressed business, additional attention is often given to communicating the value of items that may not be fully valued in the financial statements. Brands, intellectual property and historic tax losses are all examples of items that may be of significant value to a purchaser. Highlighting these aspects can make an acquisition more appealing.

“These eight focus areas can help to sell a distressed business and are important in reaching a successful outcome, but it should be noted that it will remain a challenging process,” Wainwright explains. 

With recent studies indicating that the valuation of distressed business is trending north. With increased appetite from buyers who are accustomed to taking on these situations, it is likely that more distressed deals will be seen in the coming months. “Preparing management teams as best as possible for delivering these will be key to ensuring these businesses can pass on to new owners who can hopefully drive the restructuring required to see these succeed,” Wainwright added.