Atos CEO leaves; IT Consulting Firm Unveils Separation Plan – ChannelE2E | Region & Cash

Rodolphe Belmer, former CEO, Atos

Atos CEO Rodolphe Belmer is leaving the company after just five months in office and the IT consultancy is now exploring a separation plan that could organize the company into two publicly traded companies.

Among the question marks: Will Atos’ breakup strategy attract potential private equity, MSP or MSSP buyers for various Atos business assets focused on digital transformation, big data, cybersecurity and managed infrastructure?

The spontaneous reaction to the wind-up plan was negative: Atos shares fell 27% on June 14, 2022 as investors worried about the company’s strategic direction, Reuters noted.

Atos CEO leaves after board debate

Rumors of a possible dissolution of the Atos company or sale of assets have been swirling for more than a year – even as Atos continues to be an IT consulting company with a focus on Salesforce, Snowflake, ServiceNow, Amazon Web Services, Google Cloud Platform (GCP) and Microsoft acquired Azure.

The arrival of CEO Rodolphe Belmer in January 2022 and a massive $2.7 billion writedown in February 2022 should calm rumors of a split and asset sale. Belmer promised to realign the ailing IT consulting firm with a turnaround plan.

Fast forward to June 2022, and the turnaround plan has now shifted towards a separation plan. In addition, Atos has sold a stake in Worldline for €220 million (around US$229 million).

Atos IT Consulting Business Units: One grows, one shrinks

Nourdine Bihmane, CEO, Evidian

Philippe Oliva, CEO, Atos Tech Foundations

The latest effort is to split Atos into two companies:

  • A “SpinCo” known as Evidian: Led by Philippe Oliva, this company will provide digital transformation, big data and cybersecurity services. Before the split, Evidian was primarily focused on identity and access management (IAM) software. But it sounds like additional services — maybe Cloudreach, for example — are moving into this deal. The good news: The Evidian unit is growing — with 2021 sales of €4.9 billion ($5.11 billion), a 5% organic increase over 2020, and an operating margin of 7.8%.
  • The “TFCo” or “Tech Foundations” business is the core of Atos: Led by Nourdine Bihmane, this company will offer Managed Infrastructure Services, Digital Workplace and Professional Services. The bad news: The Atos unit — with sales of 5.4 billion euros ($5.6 billion), excluding Unified Communications & Collaboration — will shrink 12% in 2021 from 2020 and an operating margin of -1%. This unit would aim to achieve a “full turnaround” by 2026 and restore growth, profitability and cash generation.

Private Equity – Interested in Atos? The Atos plan envisages both companies going public. But the plan could also reignite bidders’ interest in the various Atos assets, ChannelE2E believes. As early as mid-2021, Cinven was among the private equity firms interested in acquiring Atos, Unquote reported. KKR, Advent International and Bain may also have taken a look at the IT consulting firm, according to the Unquote report added in August 2021.

Cinven’s investment horizon for its portfolio companies is typically four to five years, according to the private equity firm’s website. Cinven’s existing investments include Spanish telecoms operator MasMovil and international fiber infrastructure provider Ufinet, including in the IT sector.

Atos and Kyndryl: Similar challenges, opportunities

In a way, Atos’ business development mirrors that of IBM. In fact, IBM spun off its Kyndryl-managed infrastructure business in late 2021. Under CEO Arvind Krishma, IBM has acquired faster-growing hybrid cloud consulting firms.

After Kyndryl became a standalone company, Kyndryl’s stock has plummeted as investors wait for revenue growth. But the building blocks for such growth are now in place. In fact, in recent months, Kyndryl has moved beyond traditional managed infrastructure services to forge relationships with Amazon Web Services, Microsoft Azure, and Google Cloud, among other digital giants.

We will monitor whether the Atos/Evidian plan follows the IBM/Kyndryl separation roadmap.

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