Accenture is exploring a potential sale of its Greater China business in a deal that could value the operations at up to $1.5 billion, the Financial Times reported.
The IT consulting giant is looking to sharpen its strategic focus and convince investors it can benefit from the artificial intelligence boom, the report mentioned further.
The company has hired JPMorgan to advise on a strategic review of the business after receiving unsolicited interest in the unit over the past year, the report mentioned further, citing people familiar with the matter.
The potential sale could attract private equity firms and a limited number of strategic buyers, according to the report. Accenture may also retain a significant minority stake to ensure continuity for clients. However, there is no certainty that the review will lead to a transaction.
Why is Accenture considering a China exit?
The potential divestment comes as Western professional services firms face growing challenges in China amid tighter security regulations governing the movement of sensitive information across borders.
Several firms, including McKinsey, have scaled back their operations in the country. The restrictions have required companies to separate their IT systems and limited their ability to generate operational synergies across markets, according to the FT.
‘s Greater China business includes mainland China, Hong Kong and Taiwan. The company operates in more than 120 territories worldwide and reported revenue of $74.2 billion for the financial year ended August.
Its broader Asia-Pacific business generated around $10 billion in revenue last year, the report said.
How does the potential sale fit into Accenture’s AI strategy?
The review comes as investors debate whether artificial intelligence will strengthen ‘s business or threaten parts of its traditional consulting and outsourcing operations.
The company expects businesses to require more external expertise to implement AI systems and integrate the technology into their operations. However, some investors fear that AI could enable companies to replace consultants and bring functions previously outsourced to service providers in-house.
At an investor event on Wednesday, Accenture said revenue growth was likely to remain subdued over the next two years before accelerating towards the end of the decade as demand for AI services gains momentum, according to the FT.
The company’s long-term outlook helped lift its shares, which had risen 85% from their June lows, the report said. Accenture’s latest full-year results also exceeded Wall Street expectations, supported by stronger performances in both consulting and outsourced services.
How could the proceeds be used?
A sale of the China business could provide Accenture with additional capital as it expands its AI-related services and pursues acquisitions.
The company plans to reinvest some of the savings generated through its own use of by keeping prices competitive for clients and acquiring capabilities that strengthen its AI offerings. It has also committed to maintaining modest debt levels and returning significant amounts of cash to shareholders through share buybacks and higher dividends.
Accenture Chief Financial Officer Angie Park indicated that disposals could form part of the company’s capital strategy. At the investor event, she said the company had a history of exiting businesses, offerings, countries and contracts that no longer met its strategic or return thresholds, the FT reported.