That deal not only gave CGI ownership of the unit managing Bell Canada’s IT systems, but it also made it the recipient of the largest outsourcing deal in Canadian history: a 10-year, $4.5-billion contract—a coup that Jarislowsky points to as Godin’s original masterpiece, and a harbinger of more to come.
In the view of Michael Sabia, who was CEO of BCE from 2002 to 2008, Godin is a visionary who hasn’t received the credit he deserves. “He’s been able to turn that business from something that started in a garage into a very large global business,” he enthuses. “This is an accomplishment of enormous magnitude. There are damn few people in Canada who’ve done what he’s done.”
Having spent years unsuccessfully attempting to take BCE private, Sabia has a special appreciation for Godin’s dealmaking talent. “This is a guy who has acquired, over the last 35 years, 70 different companies,” he says. “And every one of those acquisitions—every one of them—has been accretive to earnings. This is unheard of.”
In 2009, Sabia became CEO of the Caisse de dépôt et placement du Québec, the $176-billion Quebec counterpart to the Canada Pension Plan. And he found himself once again a CGI client, since the Caisse relies on CGI for a variety of services, including some IT management and advice on application development. “The nature of what they do requires some level of symbiosis,” Sabia says. “When you outsource a major system, you outsource part of your central nervous system.”
Since the Caisse effectively serves as Quebec’s investor-in-chief, it’s no surprise that it has also partnered with CGI on other business. A pivotal opportunity arose in 2012, when Godin launched CGI’s effort to buy London-based Logica. It was a move not short on ambition, since Logica was a much larger competitor by revenue, with huge contracts with the U.K. government and scores of other European governments and companies.
In the ensuing deal, CGI paid about $2.7 billion in cash and assumed $515 million in debt, pushing CGI’s total debt to more than $3 billion (since reduced). CGI estimates the purchase will increase earnings by 25% to 30% in the first year, and then accelerate. To help pay for Logica, CGI sold $1-billion worth of shares at $21.41 to the Caisse. Two years later, with CGI shares in the $30 range, Sabia has reason to be pleased: Not only does the Caisse own a quarter of CGI, but its investment is now worth an extra $500 million.
Logica, says Godin, “had been on our radar screen since 2006,” in large part because the U.K. firm had purchased a French company, Unilog, that Godin had coveted. Godin’s first visit to Logica’s London offices came in 2007 during a freak snowstorm, he reminisces. “A lot of people didn’t make it into their office that day because of the storm, and the secretary who greeted us was surprised to see us,” he recalls. But it was no problem for a Quebecker. “I told her we were tough after 400 years of natural selection.” As is often the case with Godin’s jokes, the line contained a predatory subtext: A few years later, he came back to buy the company.
Logica, he says, is the perfect fit for CGI, and the integration of the two companies is running a full year ahead of schedule. “I’m quite impressed by that because I thought that was going to be, if not mission impossible, then certainly mission very tricky indeed,” says Anthony Miller, managing partner at TechMarketView, a British IT analyst.
Godin and CEO Roach say they look at the integration of Logica simply as a bigger, more intense version of an exercise that CGI has mastered through scores of previous such deals. “It’s always been in our DNA to continue to grow, which is a bit unique in Canada, where you tend to have entrepreneurs who cap and sell,” says Roach. “Essentially, when we acquire a company, what we are acquiring are professionals who have very deep relationships with clients,” he continues.
“It’s a process that takes some time. In the first year, we’re very focused on putting our operating methods in and delivering good-quality services, because without that you’re not going to sell anything else. Then, after we build our capabilities with the client, we expand our wallet share with that client and we expand with new clients.”
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