Kyndryl reportedly in talks to buy DXC Technology

If the deal goes through, CIOs struggling with legacy integration strategies may have some new options.

Managed infrastructure services provider Kyndryl is considering a bid for competitor DXC Technology, Reuters reported Monday, citing people familiar with the matter.

It said that Kyndryl is discussing the bid with private equity fund Apollo Global, and that they could offer between $22 and $25 per share to buy DXC, prompting the DXC share price to rise from around $16 when the markets opened Monday morning to nearer $19 at close on Wednesday. 

The Reuters report also noted that DXC “is separately soliciting bids to sell its insurance software business for more than $2 billion and may opt to remain an independent company under Raul Fernandez, who was appointed chief executive in February.”

Steven Dickens, vice president of hybrid cloud at The Futurum Group, said that he saw much to be optimistic about if the deal goes through.

“Scale matters in IT infrastructure services. Kyndryl is the largest player and has strong partnerships with the hyperscalers and many software providers, and this gets them preferential pricing vs smaller players,” Dickens said. “Kyndryl has been driving mainframe modernization faster and more holistically than their peers such as DXC. Kyndryl’s mainframe business is six times larger than DXC’s and they have a much bigger bench of skills and a more developed innovation roadmap with Bridge and their AI announcements recently.”

DXC’s stock has taken a beating this year, having traded at $24.19 on Jan. 12. That is from a 5-year high of $56.64 back in the summer of 2019.  

“DXC will be cheap to buy and the Kyndryl CEO is a finance guy so he will be able to drive synergies. If Kyndryl announces this deal, I would be bullish on the company’s prospects to drive innovation for clients and to drive out costs,” Dickens said. “This acquisition would bring incremental growth to Kyndryl, which is the company’s focus in 2025.”

CIO.com reached out to media representatives for DXC, Apollo and Kyndryl seeking comment. None replied.

Kyndryl has focused this year on growing its consulting business, Kyndryl Consult, to try and return to growth by rapidly expanding its partnership ecosystem to deliver more diversified offerings. 

“These partnerships or alliances aid Kyndryl to not only deliver more diversified offerings than earlier, but also capitalize on larger technology trends, such as the greater demand for digital transformation, cloud migration, management of rapidly growing data, security concerns about IT systems, and accelerating the pace of technological advancement, to increase its revenue,” CIO.com reported in February. “This was not fully possible when the company was a part of IBM and had to give preference to IBM’s software and services.”

Kyndryl is organized into managed services practices for applications; data and AI; core enterprise and zCloud, IBM’s mainframe-as-a-service offering; digital workplace; network and edge; security and resiliency; and cloud. There’s also a customer advisory practice that combines managed services, advisory services, and implantation, and a consulting division.

DXC is divided into two major segments, global infrastructure services and global business services.