The wrapping is not even entirely off Cap Gemini Sogeti SA’s shareholder restructuring between its holding company parent Sogeti SA, Daimler-Benz AG and CGIP, and people are already kicking it around the block. Reports in the French business press Monday and Tuesday insinuated a power struggle at Cap Gemini between founder Serge Kampf and Klaus Mangold, chairman of Daimler-Benz InterServices AG – debis. Not surprisingly, the reports focus on some provocative statements Mangold made, and ignore others, and also ignore the fact that an agreement was concluded. Late Tuesday, Mangold repudiated his remarks published in an interview with La Tribune-Defosses. In that article, he said he would have taken control of Cap Gemini in 1991, as was possible in the original agreement, but was prevented by US regulations that severely restrict banks in the services sector if they hold over 25% of a company. Daimler-Benz’s primary shareholder is Deutsche Bank AG. (Under the new structure, Daimler holds just under the 25% limit).
Under attack
The article said Mangold expressed satisfaction that Cap Gemini’s new structure was clearer and that the operation didn’t require any more money, just conversion of a $245m loan into equity. Imagine that Serge Kampf loses his majority and his power without recuperating even a franc for all of that? What more could one ask for? the paper quotes Mangold as saying. It also quotes him saying Kampf will, from now on, be the shareholder who will have the least participation. He will no longer be chief executive and will not be the only decision-maker. Under the new structure, Cap Gemini will be governed by two boards, one in charge of operations and chaired by Kampf, and a shareholder supervisory board chaired by Mangold. In a statement, Mangold said, There is no rivalry between Serge Kampf and I, we have complete confidence in his management and have tighter co-operation with him under the new structure. Any insinuation to the contrary is pure speculation. Indeed, according to sources who overheard similar remarks from Mangold during a dinner after the conference said that he was under attack from German journalists who demanded to know how Daimler would get more management control over Cap Gemini. The interview certainly belied what he said during the press conference: The scheme Mr Kampf presents to you today is the result of an efficient effort we’ve made together over the last few months. We know each other now and after five years of engagement, we are now announcing the marriage. We have a clear determination to increase our stake in Sogeti, not only with a personal commitment, but with a capital one by participating in the recapitalisation. Furthermore, he said, If we want to challenge our big competitors in the service arena, we have to come up with a European response. If we don’t, our competitors, notably the Americans, will take more of our market and we may end up with only one or two companies controlling it in an oligopoly. If a rivalry indeed exists between Mangold and Kampf, it begs a further question that some observers are beginning to ask – will the new arrangement enable Cap Gemini to return to its golden era as Europe’s leading systems integrator? Of course, all of Cap Gemini’s managers declare that the new structure will provide better synergies between the consulting and systems engineering branches.
By Marsha Johnston
Cap Gemini chief operating officer Geoff Unwin said, It will allow us to bring two important parts of the group closer together and maximise shareholder value while preserving the cultures. Neither Mangold nor Unwin specified how this synergy would be obtained, but in a conversation after the announcement, Unwin recounted Cap Gemini-Hoskyns’ experience. The group, he said, has won between 40 and 50 contracts since it started using more of Gemini’s services. From a minimal percentage of Cap Gemini revenue in 1995, Gemini should account for between 10% and 15% in 1996, he predicted. It is certain that little synerg
y has existed between debis and Cap Gemini since the 1991 agreement. In Germany, for example, the merger of Cap Gemini Deutschland and debis systemhaus has been nothing more than a deadweight on Cap Gemini’s books, says Jean-Francois Perret, director of research for Paris-based market researcher Pierre Audoin Conseil, quoted in Les Echos. Furthermore, Perret says, the two groups invested separately in consultancy groups, which proves a lack of synergy between them, which exists to this day. As Jurgen Schrempp, Daimler’s new chief executive, gets his restructuring plan for the company, called Dolores, under way, Gemini Consulting is not even among the nominated companies. German analysts even speculate that the structure announced last week is a prelude to Daimler divesting Cap Gemini entirely because Schrempp wants to keep only services related to transport. The view is certainly not shared by Mangold, at least publicly. Why do we make this investment? he said at the conference. It is a strategic, long-term investment, not only for debis but for Daimler-Benz to have a bigger foot in the services sector that has a rate of growth above 10%. He said debis wants to develop services particularly in the financial sector, which he said would be facilitated by Cap Gemini’s position there. Mangold said further that the growth perspectives for services and consulting are good for both Cap Gemini and debis. We are also seeking closer links between consulting and service. He said debis systemhaus would show a strong increase in its 1995 revenues, to be released in the next few days.
Return to growth
Cap Gemini did not make a similar claim, but said its results would be released in February. Kampf noted that no new capital increase for the new company is expected but, rather a return to growth. Kampf said the new Cap Gemini is targeting revenues of about $4,000m by the end of 1999, up from its current level of $2,760m. Pierre Hessler, deputy chief operating officer and chairman of Gemini Consulting Holding SA, said 1995 was a difficult year for the consulting group, which posted a net loss on revenues of some $500m. 1996 will be a year of recovery, he said. As it stands today, there is no debis representation on the operational board. Kampf said he will propose to Cap Gemini shareholders at the end of January to nominate Karl-Heinz Kachinger, president of debis systemhaus, to the operational directorate. In any case, said Pierre Audoin’s Perret, the new structure will at least give Cap Gemini the chance to devise, finally, a true industry strategy. All of Cap Gemini’s efforts over the last two years have converged toward recovering a good level of growth and profitability. Now it must look at ceding some activities and acquiring others. Compared to IBM, Computer Sciences Corp and Sema Group, firms like Cap Gemini and Andersen Consulting, which have not budged, have lost market share, he said.
