The Hindu Business Line : M&As in IT, BPO space slip to $475 m in Jan-April

Looking ahead
“Going forward, the MindTree deal will add significantly to the May numbers, and hopefully also influence other mid-sized companies to look at similar transactions for scaling-up operations,” says Mr Harish of Grant Thornton.

Moumita Bakshi Chatterjee

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New Delhi, May 18 Hit by the US slowdown blues, the total M&A deals in IT and BPO space tanked to $475 million between January and April 2008, almost half of the year-ago level, but industry analysts see the recent big-ticket deals such as MindTree-Aztecsoft and HP-EDS bringing back sheen to the IT counters in coming months.

In the first four months of 2008, the value of the total cross border deals stood at about $411 million (compared to over $600 million in the same period previous year); while the overall domestic deal pie amounted to $64 million. In contrast, between January and April 2007, the value of mergers and acquisitions — both cross border and domestic — in the IT/BPO space had added to about $897 million, according to advisory firm Grant Thornton.

“Going forward, the MindTree deal will add significantly to the May numbers, and hopefully also influence other mid-sized companies to look at similar transactions for scaling-up operations,” Mr Harish H.V., Partner (Corporate Advisory Services), Grant Thornton, said.

Earlier this month, MindTree announced that it has entered into a definitive agreement with the largest shareholder of Aztecsoft to acquire 32.57 per cent at Rs 80 a share.

Another deal, which analysts expect would set the IT deal street abuzz, is HP’s recent decision to acquire technology services firm Electronic Data Systems (EDS) for an estimated $13.9 billion.

“The HP-EDS deal, in terms of globalisation, has placed the combined entity in a dominant spot in infrastructure services. The Indian top-tier players would be under pressure to rev up their business consulting expertise along with a wider global footprint. “We expect the acquisition sweet spot to range (at) $0.5-2 billion for targets in the US and UK, and $200-500 million for Europe,” Mr Avinash Vashistha, Chairman and Chief Executive Officer of Tholons, said.

Among the prominent deals inked in April was Satyam Computer Services’ acquisition of S&V Management Consultants, a Belgium-based supply chain management consulting firm. Other transactions included software services firm 3i Infotech Ltd’s agreement to acquire US-based Regulus Group LLC; and Essar Communications Holdings strategic stake in Obopay Inc, a service provider for payments via mobile phones.