The break up of LogicaCMG...

The FT today Click here chronicles the long protracted search for a new CEO at LogicaCMG and speculates on the increasing risk that the delay creates to LogicaCMG's future as an independent company.

Firstly, the time that Zygos (the headhunters) seem to have taken to get on with this process since Martin Read announced his departure, seems excessive. This has created all kinds of internal tensions which we have written about before. Not least the appointment of Jim McKenna as acting CEO and the departure of fellow director Didier Hermann as he couldn't work with McKenna. I have long favoured the appointment of an external candidate but the prolonged time to find one merely means that there could be further unrest when he is appointed.

However, all the talk "on the street" in the last period has been about the increased vulnerability of LogicaCMG to a bid during this period of increased uncertainty. LogicaCMG is the "last remaining prize" amongst UK-owned IT services companies. It is the only one of any size left. Even its smaller rival, Xansa, has now been snapped up (at an attractive price too) by French Steria.

LogicaCMG has many attractions. A high reputation for its project management capabilities on complex projects. A strong UK presence plus good spread throughout Europe. A bit slow to the off-shoring table but that could add to its attractions to some bidders keen to apply the 'blended' model. At a P/E of c12, it's also below the market average due to its recent lack-lustre performance. A bid could come from both trade buyers and PE. Indeed, this would be a reasonably small (and therefore do-able) deal for most PE firms even in the current climate. LogicaCMG has a current market cap of £2.4b. A breakup would be the favoured route and could be the end result of either a trade purchase (buy it all and sell the bits you don't want) or PE (repackage, revamp and sell or float the various parts)

LogicaCMG has for so long been the main (only) torch bearer for the UK-owned IT services sector. It is 'regrettable' that it could all end as a result of a botched succession handover process