IT Firms Go Shopping

A lot of inorganic activity is being seen in the Indian IT space lately. As the traditional money making machine of application development and maintenance stagnated, companies moved to other ways to grow. They either captured the opportunity offered by emerging technologies or by emerging economies. In an attempt to grow in either of the above directions, IT firms have been company-shopping for a while now.

One of the latest and most talked about acquisitions in the recent times was that of Lodestone Holding AG by Infosys for a sum of CHF 330 million. The Swiss-based global management consultancy firm advises companies on devising innovative business operating models, optimising processes and implementing new technologies leveraging SAP. The effects of this acquisition would be strengthening of Infosys in the areas of consulting and geographies of continental Europe, Latin America and Asia Pacific.

Its financial benefits of were visible in the Q3FY13 results announced by Infosys. The revenues of the company grew by 6.3% sequentially. If it weren’t for Lodestone, this figure would have stood at 4.2%.

Working on the same level of benefits, the latest has been Mahindra Satyam’s acquisition of a majority stake in Complex IT, one of the largest SAP consulting providers in Brazil (the second fastest growing geography for SAP AG). The acquisition would help Mahindra Satyam develop solutions for the Enterprise Solutions market in Latin America for large manufacturing, financial and consumer service companies.

In terms of geographies, continental Europe has been turning large on importance since most of the European revenues of Indian IT firms are currently garnered from the UK. Reports have been indicative of companies like Infosys, TCS, Wipro and HCL Tech planning to spend around USD 350 million on acquisitions, three in Germany and one in France. Each acquisition in Germany is valued under USD 50 million and the one in France at USD 100 million. On similar lines, Cognizant recently acquired six C1 Group companies helping it augment a presence in Germany and Switzerland.

Be it geography or services, IT firms are looking at opportunities for growth. They have been actively acquiring companies to transform their strategy and working on finding new avenues for growth. In the upcoming coming quarters, we can expect an increased activity in transaction services on the IT front.