Accenture is exploring a potential sale of its Greater China operations in a deal that could value the business at up to $1.5 billion, as the technology consulting giant reassesses its portfolio amid growing investor focus on its artificial intelligence strategy, the Financial Times reported.
The company has hired JPMorgan to conduct a strategic review of its China business after receiving unsolicited interest in the unit over the past year, according to people familiar with the matter cited by the FT. The review covers Accenture's operations across mainland China, Hong Kong and Taiwan. The potential sale could attract interest from private equity firms and a small group of strategic buyers. Accenture may also retain a significant minority stake in the business to maintain continuity for clients, although there is no certainty that the review will result in a transaction.
Accenture did not respond to requests for comment, while JPMorgan declined to comment, according to the report.
Accenture weighs China exit as AI strategy comes under scrutiny
The potential divestment comes at a time when Accenture is trying to convince investors that artificial intelligence will expand, rather than undermine, demand for its services. Investors have been divided over whether AI will benefit the consulting industry by creating demand for implementation and integration services, or hurt traditional consulting and outsourcing businesses as companies automate more functions and bring work in-house.
The company told investors last week that revenue growth is likely to remain subdued over the next two years before accelerating towards the end of the decade as demand for AI-related services increases. Accenture's shares have risen sharply from their June low following the company's updated outlook and full-year results.
The company reported revenue of $74.2 billion for the financial year ended August and operates in more than 120 territories worldwide. Its wider Asia-Pacific business generated roughly $10 billion in revenue last year.
The potential sale also comes against a more challenging operating environment for Western professional services companies in China. Tighter security regulations around sensitive information have prompted several firms, including McKinsey, to scale back their operations in the country. The regulations have also required companies to separate some IT systems and reduced the ability to generate efficiencies across borders.
A divestment of the China business could give Accenture additional capital as it looks to expand its AI capabilities. The company has said it plans to reinvest some of the savings generated through the use of AI internally into keeping prices competitive for clients and acquiring businesses that strengthen its AI services. It has also committed to maintaining relatively modest debt levels while returning cash to shareholders through share buybacks and higher dividends.
Accenture Chief Financial Officer Angie Park indicated that asset disposals could form part of the company's broader capital strategy. She said the company had a record of “exiting businesses, offerings, countries, contracts that no longer meet our strategic or return thresholds.”