With the $2.7-billion acquisition of TriZetto, the US-headquartered Cognizant Technology Solutions has set a new benchmark in deal size among its peers in India –Wipro, Infosys, Tata Consultancy Services and HCL Technologies, with whom it competes for most of the deals.
Industry experts believe that today’s deal will force the Indian software companies to re-think their acquisition strategies.
It has been recruiting more graduates in India every year than its competitors. Two years ago, it overtook Infosys to become the second largest software company in India. Nearly three-fourths of Cognizant’s 1.87 lakh employees work in India.
Today’s deal shows its aggression to get closer to the leader TCS. It is going to be tough for an Indian company to look for such a deal in the near future.
Prior to today’s announcement, the $135-million acquisition of the pharmaceuticals marketing focused marketRx in October 2007 was the largest announced by Cognizant, which has acquired nine companies in the last two years.
While the scope has gone up dramatically, the objective is still the same; to rapidly augment existing healthcare expertise and insight in ‘what is a solid market,’ said Joseph Walent, Analyst, Technology Business Research, Inc, US.
The Indian companies have been conservative in their acquisitions and this deal may shake them from that course, but the likelihood of wider and deeper go-to-market alliances, as in the CSC-HCL partnership, will likely become more prevalent, said Walent.
According to the Chennai-based Venture Intelligence, a provider of data on private company financials, transactions and their valuations, Indian IT companies have made only eight acquisitions with announced value of over $500 million since 2004.
With the exception of iGATE Global’s $1.2-billion acquisition of IT services firm Patni Computer Systems in January 2011, the other transactions have been below $1 billion in value.