Unlock Editor’s Digest for free
Roula Khalaf, editor-in-chief of the FT, selects her favorite stories in this weekly newsletter.
Accenture is working on a potential sale of its China business for $1.5 billion, as the world’s largest publicly traded IT consultancy seeks to focus on its fastest-growing business and convince investors it can adapt to the AI boom.
The company hired JPMorgan to work on a strategic review of its China business after receiving unsolicited interest in the unit over the past year, according to people familiar with the matter. The whole of Greater China could be valued at up to $1.5 billion, they added.
The sales process is likely to attract interest from private equity groups and a small group of strategic buyers, the sources said. Accenture may choose to retain a significant minority stake in the business to help ensure continuity for clients. There is no guarantee that the review will result in a transaction.
The potential divestiture comes after Accenture shares have tumbled in recent months as investors question whether the company will win or lose from AI. Accenture is betting that companies will need more of its services to help them deploy technology, while pessimistic investors say AI will allow companies to replace consultants and bring functions they previously outsourced back in-house.
Several Western professional services firms, including McKinsey, have scaled back their operations in China amid tightening security regulations intended to prevent sensitive information from leaving the country. The rules forced companies to separate their IT systems and limited the ability to generate synergies across borders.
Accenture did not respond to requests for comment. JPMorgan declined to comment.
Accenture told investors on Wednesday that it expects revenue growth to remain moderate over the next two years before accelerating toward the end of the decade as demand for new AI services takes off in earnest.
The long-term forecast – and the fact that Accenture was willing to publicly commit to its revenue forecast despite the uncertainty – provided further boost to the stock price, which surged 85 percent from its June low. The annual figures from the beginning of the month exceeded Wall Street expectations after a better performance in two sectors of activity: consulting and outsourced services.
Proceeds from the sale of the Chinese operations could prove useful. Accenture also plans to reinvest some of the benefits of its own internal cost savings from AI by keeping prices low for clients and making acquisitions that strengthen its AI service offerings. At the same time, he promised to maintain modest debt levels and pledged to return significant amounts of cash to shareholders in the form of share buybacks and dividend increases.
Angie Park, chief financial officer, indicated that Accenture could raise capital through divestitures in a brief remark at the end of the investor event. She said the company had a history of “exiting businesses, offerings, countries, contracts that no longer meet our strategic or return thresholds.”
Accenture, which reported revenue of $74.2 billion for the fiscal year ended August, operates in more than 120 territories worldwide. Accenture’s operations in Greater China include Taiwan, Hong Kong and mainland China. Its broader Asia-Pacific operations generated about $10 billion in revenue last year.
Several analysts raised their price targets for Accenture shares following Wednesday’s investor event, after the company said demand for new AI services would significantly expand the IT consulting market.
UBS analysts wrote in a note that “Accenture is well positioned not only to survive, but to thrive by exploiting its $3 trillion addressable market.”
Gn bussni
