Xerox Corporation announced yesterday that it would acquire Affiliated Computer Services (ACS) for $6.4 billion. ACS is a major, long-time player in the speed camera, red light camera, tolling and parking ticket business. Xerox, famous for its domination of the photocopying market from the 1960s to the 1980s, sees the purchase as a way to reinvent itself and dominate the business outsourcing market.

"By combining Xerox's strengths in document technology with ACS's expertise in managing and automating work processes, we're creating a new class of solution provider," Xerox CEO Ursula M. Burns said in a statement. "A game-changer for Xerox, acquiring ACS helps us expand our business and benefit from stronger revenue and earnings growth."

The outsourcing of government and law enforcement functions to private companies is a growing market. US Public Technologies pioneered the business model in which a private company pays a city for the right to issue automated traffic citations. The company, in turn, is paid based on a percentage of the revenue collected, meaning the city faces a no-risk, all-profit proposition. USPT quickly convinced twenty-seven cities like Baltimore, Denver, Los Angeles, San Diego, and Washington, DC to share the profit from automated ticketing machines. In December 1998, defense contractor Lockheed Martin saw the long-term potential in USPT's contracts and bought the company outright.

Lockheed continued expanding the traffic camera and parking ticket outsourcing business until it was purchased by ACS in August 2001 for $825 million. Since then, the company has been plagued with scandal. In December, a Dallas judge ruled that ACS had been illegally operating its automated ticketing machines without a proper license. In March 2007, ACS was accused of vandalizing speed cameras in Washington, DC after losing the contract to a competitor (view PDF of complaint). In 2006, ACS faced bribery charges in Edmonton, Canada after police officers accepted lavish gifts from the company -- including travel, sports tickets and female escort services -- in return for a recommendation that ACS be given a no-bid, $90 million photo ticketing contract. In October 2008, a judge let the police officers and ACS off the hook without bringing the case to a jury.

Under the terms of the proposed Xerox-ACS merger, ACS will continue to operate as an independent division under the leadership of current ACS CEO Lynn Blodgett who will answer to Burns. The deal requires regulatory and shareholder approval with closing expected in the first quarter of 2010.