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After failing to win the bidding race to acquire Axon, Infosys has managed to acquire Lodestone Holding, which is a SAP-enabled solutions provider.
The valuation for the deal, too, seems to be a tad better than what peers paid, going by the past acquisitions made by Indian IT companies and by the ratio of the deal size to the target company’s revenues.
The acquisition will mean access to the relatively resilient economies in Europe — Switzerland and Germany — from where Lodestone derives nearly three-fourths of its revenues. Of course, Infosys’ high-margin package implementation and consulting business, too, will receive a fillip.
In line with past
After a gap of nearly three years, this is the first time that an IT major has announced a large acquisition. The present deal is mid-way among the sizes of deals done by software majors in the past.
Between 2007 and 2009, Indian IT players managed to lap up companies, both domestically and overseas, in the range of $100-600 million, with the largest among them being the HCL-Axon deal ($650 million), the TCS-CGSL deal ($512 million) and the Wipro-Infocrossing deal ($600 million).
The acquisitions spanned a wide range of offerings from infrastructure management to SAP consulting to BPO/KPO services.
The ratio of deal size to target company’s revenues ranged from a multiple of 1.8 to 2.6 times, in the above-mentioned acquisitions.
Lodestone’s recent financials are not mentioned, but its Web site gives a revenue figure of 180 million Swiss Francs in 2010.
This means that at 330 million Swiss Francs Infosys may have paid about 1.7-1.8 times Lodestone’s revenues, which is lower than what its peers have paid for relatively large acquisitions.
Given the relatively small size of the acquisition, integration may not be too challenging for Infosys, although taking over 850 employees of Lodestone may escalate costs.
> venkatasubramanian.k@thehindu.co.in
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