When Xerox Corp. vice chairman and finance chief Lawrence Zimmerman was asked at a recent forum why 2010 was the best time for Xerox to make a $6.4 billion acquisition, he smiled and said, “It wasn’t.”
That crisp reply was typical of Zimmerman, a 31-year IBM veteran who was lured out of retirement in 2002 by Xerox’s then-CEO, Anne Mulcahy, to become CFO for a company in search of a new direction. Elaborating on his quip about Xerox’s acquisition of Affiliated Computer Services (ACS), Zimmerman explained that companies must be opportunistic about acquisitions, and pounce when a deal seems important enough, even if the timing isn’t optimum.
The importance of the deal for Xerox is clear: a company that remains best-known for photocopiers believes that a bold move into technology services is key to its reinvention. To lay the groundwork for this corporate makeover, Zimmerman began his Xerox tenure with an intense period of finance-department reorganization, bringing in top talent from other global firms and repositioning the accounting function as a centralized and more independent entity.
Another adjustment has entailed learning to navigate what current CEO Ursula Burns has called, perhaps pejoratively, the Xerox culture of “niceness.” Zimmerman certainly didn’t have to worry about that at IBM, and he admits that by nature he can be contentious. Nonetheless, he says, “It’s my job as a leader to not necessarily change the culture, but to understand it and to work within it to help lead us where we need to go.”
Obviously, when a company makes a $6 billion acquisition, finance is involved, but what specific role or roles did it play?
Prior to the ACS acquisition, finance was there both tactically, fulfilling fiduciary responsibilities, and strategically, studying what was available in the marketplace for Xerox as we considered how to proceed with the transformation. Before ACS, we did some small acquisitions, and then decided that scale was really what was necessary. So that was the first big piece of work.
There was also a tremendous amount of due-diligence work in the mergers-and-acquisitions department, and in the treasury shop, for the significant financing associated with it. And once we closed the acquisition, getting all the plugs in the right places so we can report earnings and have the right measurements and controls for the expanded company. So there are really three stages of it, and finance plays an important role in all three.
The initial investor reaction to the creation of this repositioned Xerox was, at the very least, uncertain. What steps did you take to increase the Street’s understanding of the acquisition and your overall strategy?
Investors were uncertain, in part, because of the surprise aspect — this was a large deal that we did not telegraph. Investors knew we planned to do a services acquisition, I think, but it took some educating for them to see the adjacency of ACS and Xerox and what results when you put them together: an infrastructure that contains business process, IT, and document outsourcing. They now see that we’re the only company that does all that. I think once investors understood that, they began to see it was a deal made in heaven.