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Tech Mahindra has snapped up digital transformation firm UK-based entity BIO Agency for 40 million pounds in an all-cash deal to expand its digital portfolio.
The consideration is the enterprise value of 40 million pounds plus surplus cash not exceeding 5 million pounds as at the completion date. The payment of 22 million pounds and the surplus cash will be made upfront and the balance as deferred payments based on the company performance, the company said in a statement.
Though it is a small acquisition for the fifth largest IT services player in the country, BIO is expected to help Tech Mahindra compete with larger global rivals, Accenture and Cognizant, who have been able to build strong digital portfolios largely driven by acquisitions of not just smaller IT firms but also buying digital agencies.
“If you look at our digital M&As, you will see that we are focussed towards creating a holistic suite – our Dion and Target acquisitions, they were in the area of ‘Platforms’, our Pininfarina (Italy) merger was in ‘Design & Styling’ and today’s acquisition of The BIO Agency is in the growth area of ‘Customer Experience’ across several industries. It is an augmentation that will enable our journey from digital scale to digital experience,” Indraneel Ganguli, Sr. Vice-President and Global Head, Brand & Field Marketing, Tech Mahindra, told BusinessLine.
BIO specialises in digital transformation and innovation, helping organisations change the way they engage with their customers. The company recorded revenues of 12.5 million pounds for the financial year FY16 and has a strong presence in the UK with 25-30 large clients, including Western Union, Coca Cola, BBC and Microsoft.
The deal also includes a surplus cash component not exceeding 5 million pounds as at the completion date.
“A combination of BIO’s visionary thinking and delivery with Tech Mahindra’s IT to DT (Digital Transformation) strategy will enable and create digital services that get industries ready beyond just technology transformation, but a larger integrated customer experience,” CP Gurnani, MD & CEO, Tech Mahindra, said in a statement.
With Chief Marketing Officers becoming the decision makers when it comes to digital deals, traditional IT services players have been facing challenges cracking these deals since they have built relationships only with chief information officers of large enterprises over the years. Thus, acquiring digital agencies who work closely with CMOs of large enterprises, opens up doors for IT services firms.
“There are several customers where key decisions are being driven by the CMO’s office and this acquisition is in step with those opportunities. The acquisition will further strengthen and enable the company to engage with its clients at the start of the journey and more importantly, help design the customer experience for their businesses,” Ganguli said.
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