Wipro in talks to takeover UK's Equiniti

India has seen the largest merger & acquisition activities with 35.11 per cent growth reaching USD 38.1 billion in year 2014 on yearly basis, across world. Indian IT witnessed 240 deals worth USD 3.8 billion in 2014. This shows that the IT industry is eyeing an inorganic growth strategy to diversify business risk. The rich cash holding IT companies wants to utilize value for money by merger and acquisitions in the coming future.

Wipro has followed the 'string of pearls' acquisition strategy over the years which gave mixed results to the company. This kind of strategy is about acquiring small to mid size companies. However, the company changed strategy to 'move the meter as a whole'. It acquired US based Science Applications International Corporation's (SAIC) IT business in 2011 which was a successful deal. Now, Wipro is in talks to takeover UK based outsourcing group Equiniti for about Rs 9900 crore. This takeover would be one of the largest Indian takeovers of a UK company by value in Indian IT pace.

Wipro reported Rs 47318 crore revenue in FY2015. Equiniti reported around Rs 2905 crore revenue in CY2014 with growth of 13.3 per cent as compared to previous financial year. Equiniti's total revenue is 6.14 per cent of Wipro's revenue. Equiniti specialises in providing complex administration, processing and payment services to pensioners. Equiniti operates basically in four segments such as Investment solutions,Intelligent solutions,pension solutions,interest segments. Wipro has Rs 15894 crore cash and cash equivalents as of FY 2015. The company can buyout this entire deal through cash transactions.

If this deal takes place then it will be one of the largest acquisition of Wipro with valuation of about GBP 1 billion. This will give access of huge FTSE 100 clients in the UK. TCS has a subsidiary Diligenta to provide outsourcing services for the life and pensions industry in UK. To compete with TCS, this deal would give Wipro a better revenue portfolio. It will also help to grow revenue geographically as company earns 26.32 per cent of net sales from Europe continent.

Rival Infosys has planned to pursue a very active inorganic growth strategy by buying innovative technology companies. Infosys expects the inorganic growth to contribute 7.5 per cent of total revenue amounting to USD 1.5 billion by end of year 2020. Wipro accelerated its inorganic strategy and wants to be more penetrative among the competitors. As per the change in business environment, there could result more acquisitions in the Indian IT outsourcing industry in coming days.