The price of existing for one client

Posted on: 1 September 2026

Porsche AG had its IT consulting subsidiary valued by an external expert, with 19 June 2024 as the reference date. Discounted cash flow, IDW S1, the German standard for company valuations. The figure was 1,591 million euros. It sits in Porsche AG's HGB annual accounts for 2024, where it justified the transfer of MHP into a Luxembourg holding company, a move that booked a paper gain of 1,326 million. EY flagged the valuation as a key audit matter and recorded that it had discussed with management, in its own words, the expected development of MHP's revenue and margin.

On 24 August 2026, twenty-six months later, the same company was sold to Tata Consultancy Services at an enterprise value of 320 million. Over that period revenue fell from 830 to 742 million, which is 10.6 per cent. The valuation fell by eighty.

The gap between those two numbers is not an arithmetic error and not a lapse by the valuer. It measures something accounts cannot hold, which is the difference between what you are worth and what you are worth to whoever owns you.

MHP was founded in Ludwigsburg in May 1996 by Ralf Hofmann and Lutz Mieschke. Porsche took 49 per cent in 1999 and needed twenty-four years to reach full control, buying Hofmann's remaining stake in July 2023 for 255 million. He timed his exit well, because three years on the whole company he founded is worth barely more than the minority block he sold. In 2025 MHP turned over 742 million with 4,500 staff, 3,200 of them in Germany. Eighth in the automotiveIT sector revenue ranking. Real numbers.

Those discounted cash flows came from Porsche's decision to buy from MHP. While the owner and the principal client are the same party, the distinction stays invisible because nobody is in a position to test it. Separate them and the market prices what is left, which is a German consultancy carrying German labour costs inside a shrinking car industry, with a dominant client that has just walked out of the share register.

Confirmation came from the chief executive. Michael Leiters, interviewed by Business Standard on 24 August alongside TCS chief executive K Krithivasan, was asked how much the five-year 1.25 billion contract signed alongside the disposal might grow. "We will be very opportunistic on both sides. But we have defined this based on the services we are taking today from MHP."

The contract is sized on services Porsche was already buying. Two hundred and fifty million a year over five years measures an existing relationship, now written down towards a third-party supplier instead of an in-house one. The joint announcement talks about an AI Mobility Centre of Excellence dedicated to Porsche, and the money is the same money under a new heading.

Three days before the announcement, Börsen-Zeitung had run a piece on the long hunt for an MHP buyer that explained the mechanism without knowing it was describing the deal about to land. To soften the risk of the main client withdrawing, the paper wrote, sellers offer capacity guarantees, undertaking to keep buying a given volume of services for a fixed period. Then the line that closes the loop. Those guarantees generate payments which have to be reflected in the purchase price up front.

Low price and high commitment are one number seen from two sides. Porsche took 320 million because it promised to spend 1.25 billion. Promise less and it would have collected more. Without the promise nobody would have bought at all, because buying MHP without Porsche means buying 4,500 consultants looking for clients in the German car market of 2026.

Then there is how all this was announced. Porsche's statement of 24 August carries no figures at all, neither the 320 million nor the 1.25 billion. It went out as ordinary corporate news rather than an inside information disclosure under Article 17 of the Market Abuse Regulation. The German wording says Porsche and TCS are planning a collaboration. Every number sits in the filing TCS lodged with the Bombay and National stock exchanges, where the wording is that Porsche has signed a five-year deal worth 1.25 billion. Two accounts of one event, with the disclosure obligation falling entirely on one side. Handelsblatt reports that firmly agreed orders of just under a billion come on top of the price, a figure that only works if the German paper is reading the Indian 1.25 billion as inclusive of the 320 million. TCS presents them as two separate items. Both readings cannot be right and neither party has published a breakdown.

The second layer is about people, and here the same logic produces something harder.

MHP's 4,500 staff are not counted in Porsche's job reduction plan. The breakdown of the roughly nine thousand announced posts is public and does not include them: 1,900 departures plus 2,000 fixed-term contracts not renewed from the February 2025 plan, 5,000 from the Zukunftspaket agreed on 27 July 2026 with the group works council, plus around 500 from the closure of Cellforce, Porsche eBike Performance and Cetitec decided in May.

Compare the two regimes, because until completion both groups have the same ultimate owner. Staff who stay inside Porsche AG have won the employment and site guarantee extended to the end of 2035, no redundancies on economic grounds, 2.1 billion in committed investment at Zuffenhausen and Weissach, a council that extends codetermination into strategic decisions. They paid for it with 3.5 per cent of current and future pay rises deferred to 2035 and with the voluntary portion of the thirteenth month falling from 100 to 60 per cent of a month's salary. Home working drops from twelve days a month to eight. A hard negotiation with a legible outcome.

Anyone working at MHP changes hands within three or four months, with no public employment guarantee and no social plan. On the Ludwigsburg headquarters, nothing. The deal is structured as a share sale rather than a business transfer, so section 613a of the German civil code does not apply and employees have no right to object.

British readers will recognise the manoeuvre immediately, because it is the same one that keeps TUPE out of a transaction here. Buy the shares instead of the business and the employing entity never changes, so the protections that attach to a transfer of undertakings simply never engage. What makes the German case worth studying is the contrast rather than the technique. Porsche's own staff enjoy a level of protection no British workforce has ever had, negotiated by a union sitting on the supervisory board, and 3,200 German employees a few miles away crossed into a new owner's perimeter without anyone having to ask them anything.

I spent days looking for a reaction from IG Metall, the German metalworkers' union, or from any works council, in German, across every union channel. There is none. On July's Zukunftspaket there are statements and interviews. On MHP, silence.

Those 3,200 German positions are worth on their own nearly two thirds of the headcount effect that the union agreement spreads over ten years. Delivered in a quarter. Krithivasan said the rest of it plainly in the same interview: bringing TCS into the mix increases the ability to move services offshore.

The third layer is where the story bites its own tail, because Porsche is discovering that it is MHP.

Here is the sequence. July 2025, Michael Steiner gives up leadership of group research and development, which passes to Werner Tietz. September 2025, the SSP Sport platform meant to carry the next generation of electric Porsches slips "well into the 2030s". On 1 January 2026, with Oliver Blume's departure from the top of Porsche AG, the Sport Luxury brand group portfolio on the Volkswagen AG board of management is left without a holder and assigned to the board collectively, a formula the 2025 annual report records as "until further notice". On 5 July 2026 Porsche abolishes the Car-IT division of its own board, Sajjad Khan leaves and the official statement says he will contribute in future within a software partnership model. On 12 August Porsche exits the Volkswagen group CO2 emissions pool and forms one with China's Xpeng. On 24 August, TCS. Seven weeks separate the line about a software partnership model from the announcement of the deal.

Read as a chain, the Tata partnership does not open Porsche's separation from the group. It records it. This is a separately listed brand with fiduciary duties towards minority shareholders, which in fourteen months lost the leadership of group research and its dedicated seat on the parent board, then in July its internal software function too. Meanwhile the shared platform its roadmap was built on slipped by a decade. It had the motive and the means to contract outside. The structure produces the outcome on its own.

MHP is an implementation partner on the Volkswagen group Industrial Cloud, the shared production platform connecting 43 of the group's 114 plants. MHP says so itself in its own case studies. Porsche has sold Tata a piece of the group's common industrial infrastructure, and nowhere is there a statement from Wolfsburg about any of it.

So what should anyone watch now, rather than reading the announcements again?

The first marker is an accounting one and it becomes visible on 27 October, when Porsche reports its third quarter. If the 1.25 billion commitment is legally binding it has to appear under other financial obligations, a line that stood at 3,190 million on 30 June. If it does not appear, that number is a spending target and not a contract, and everything written about a five-year partnership needs scaling back accordingly.

The second is carrying value. MHP moves into the IFRS 5 held for sale category from the third quarter, and at that point Porsche has to say whether the disposal produces a gain or a loss against the books. The carrying value implied by the 2024 Luxembourg transfer was around 265 million, close to the sale price. The books had been telling a different story from the valuation report all along.

The third marker is the 3,200 Germans in Ludwigsburg twenty-four months from now. In July 2025 MHP had already cut five per cent of its German workforce through voluntary exits, under an internal strategy called Turbo 2030, and spokesman Benjamin Brodbeck said at the time that for those affected there was no longer any prospect of employment. That was the owner which had grown them as an offshoot. The owner now is a group that shed thirty thousand people in the six months before this deal.

Anyone buying your consulting capacity while dismantling their own has a different use in mind for you. Which one, the Ludwigsburg numbers will say in two years.