by Stephanie Overby

The Mess at ACS: A Time Line

Nov 28, 20075 mins
Mergers and AcquisitionsOutsourcing

One expert calls it the soap opera of the outsourcing industry. Here is a rundown of recent buyout bids, boardroom fights and other notable developments at Affiliated Computer Services.n

Two aborted buyout attempts and a boardroom meltdown at outsourcing provider Affiliated Computer Services (ACS) can be traced back to 2005 through press releases, articles in the business press and ACS’s diminishing stock price.


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Dec. 22, 2005

ACS’s stock price closes at $58.08 per share.

Dec. 23, 2005

A consortium of investment firms led by the Texas Pacific Group and including Bain Capital in talks to acquire ACS for $8 billion, or $65 per share.

Jan. 17, 2006

ACS announces that “ recent unsolicited discussions with a group of private-equity investors regarding a possible sale of the company have ended .”

Feb. 28, 2006

ACS named to Fortune‘s list of the Most Admired Companies in America for the fifth consecutive year.

Aug. 7, 2006

ACS confirms that it is conducting an internal investigation into stock options backdating going back to 1994 in response to a pending informal investigation by the Securities and Exchange Commission and a grand jury subpoena issued by the U.S. Attorney for the Southern District of New York.

Sept. 14, 2006

Investigation into stock options’ backdating continues. Since it includes a review of the preparation of the company’s Form 10-Q for the quarterly period ended March 31, 2006, ACS says it will not be able to file its annual report for the fiscal year due Sept. 13, 2006.

Nov. 27, 2006

Both ACS’s CEO and CFO resign after an internal investigation concludes that their conduct violated the company’s code of ethics.

Mar. 19, 2007

ACS’s stock price closes at $51.29 per share.

Mar. 21, 2007

ACS confirms receipt of a proposal from its cofounder Chairman of the Board Darwin Deason (the holder of approximately 42 percent of the company’s outstanding voting stock) and Cerberus Capital Management, to acquire all outstanding shares of company common stock for a cash purchase price of $59.25 per share.

ACS’s board creates a special committee of independent directors to evaluate the company’s “strategic alternatives,” including the Deason-Cerberus proposal.

Mar. 22, 2007

An article in The Wall Street Journal states: “An investigation into options backdating at Affiliated Computer Services Inc. unearthed a handwritten note in which ACS Chairman Darwin Deason discusses the practice of ‘always’ picking the ‘lowest’ prices ‘so far’ in the quarter to award stock options.”

April 20, 2007

ACS’s stock price closes at $58.75 per share.

April 23, 2007

ACS confirms the receipt of a revised proposal from Chairman Deason and Cerberus Capital Management: $62 per share.

June 10, 2007

ACS’s independent committee discovers that its chairman and Cerberus had entered into an exclusivity agreement, whereby Deason agreed to work exclusively with Cerberus to negotiate the ACS acquisition.

The committee says it reached an agreement with Deason and Cerberus to suspend the exclusivity agreement so they could “conduct a process to consider the sale of the Company that it considers to be in the best interests of the Company and its stockholders.”

Aug. 10, 2007

ACS’s independent committee announces that the suspension of the exclusivity agreement between its chairman Deason and would-be buyers Cerberus expired at midnight, but the committee was seeking an extension of the suspension “in light of the current conditions of the credit markets”.The committee says it continues “to have discussions with respect to strategic alternatives. There can be no assurance of any particular outcome.”

Oct. 30, 2007

Cerberus Capital Management officially withdraws its bid for ACS, blaming poor conditions in the debt markets.

Nov. 1, 2007

ACS Chairman Deason requests that five of ACS’s six independent board members resign. ACS releases a copy of the Deason’s letter, which The Wall Street Journal calls the boardroom equivalent of a “back-alley smackdown.”

In the letter, Deason writes: “Over the past several days, the Company has held several Board meetings and related discussions to attempt in good faith to secure a consensual transition of directors, which is in the best interests of the shareholders. I am deeply disappointed that Messrs. Robert B. Holland, III, J. Livingston Kosberg, Dennis McCuistion, Joseph P. O’Neill and Frank A. Rossi have refused to answer the will of the shareholders.”

The five board members responded: “We could fire you and the entire management team, but that would not help our shareholders, customers or employees.” Instead, all five directors resigned.

Nov. 21, 2007

The remaining independent directors of ACS’s board rejected Deason’s nominations for board replacements, noting “we have determined that we have no reason to conclude that the nominees are not independent of Mr. Deason and the company’s management.” The remaining directors have appointed Frank Varasano, Ted B. Miller, Jr., Richard W. Spears, and Kurt R. Krauss to fill the resulting vacancies.

John H. Rexford also resigned from the board, leaving a board made up of four independent directors and two management directors.

ACS also announced that former independent directors Holland, Kosberg, McCuistion, O’Neill and Rossi have agreed to dismiss their lawsuit seeking a declaratory judgment that they had not breached their fiduciary duties in responding to the offer by Deason and Cerberus to acquire the company.

Nov. 26, 2007

ACS’s stock price closes at $40.83.