Westward ho!

The tech industry is following the general merger and acquisition trend prevailing in corporate India. This year, the money spent on buying foreign companies by Indian firms was three times more than what foreign companies spent on acquiring firms here. Indian IT companies are scouting for potential buys to increase scale, reach to market as well as expanding their portfolio of offerings.

This year saw a landmark deal when telecom software maker Subex Systems acquired UK-based Azure Solutions for over $140 million, the largest ever buy-out of a foreign company by an Indian company in the IT space. Another software company, Sonata Software, bought 50 per cent stake in the IT outfit of European travel major TUI.

Indian IT services majors too followed the trend. Continuing its ‘string-of-pearls’ strategy, Bangalore Tiger Wipro bought four companies: Quantech, 3D Networks and Hydrauto Group, to plug competency gaps in its offerings.

European major Capgemini bought Kanbay for $1.25 billion while Geometric Software spruced up its services basket with its buyout of Modern Engineering’s engineering services arm for $32 million.

Subex-Azure

This $140 million deal is the largest foreign acquisition by an Indian IT company. Telecom software firm Subex Systems, which has been adding on various components of telecom software to its bouquet of offerings, acquired UK-based Azure Solutions whose revenues last fiscal stood at $31 million (more than Subex’s turnover).

Besides its products in telecom fraud management and revenue maximization, the Subex has now added on Azure's capabilities in telecom revenue assurance, interconnect, inter-party billing and best value routing.

“With this acquisition, we will have 23 of the world's largest 40 telcos among our customers and geographical reach in over 60 countries,” said Subash Menon, founder chairman, president and CEO, Subex.

It looks like this won’t be the last of Menon’s buy-outs. More are in the offing next year.

Wipro’s new pearls

Continuing its ‘string-of-pearls’ approach, Wipro bought four mid-sized companies to add on specific capabilities to its product and services portfolio.

The Indian IT major bought US-based Quantech, in May 2006. This acquisition boosted Wipro’s Computer Aided Design and Manufacturing (CAD/CAM) domain. The consideration included an upfront cash payment of $10 million and earn-outs on achieving agreed financial targets over a three-year period.

Portuguese IT company Enabler, with its expertise in Oracle retail consulting and integration, proved an attractive proposition for the ‘Bangalore Tiger’. This company was bought for €41 million ($52.5 million).

In September, Wipro acquired 100 per cent equity of Sweden-based Hydrauto Group AB, a provider of Hydraulic components and solutions, for a consideration of $31 million in an all-cash deal. This acquisition gives Wipro an Asia-Europe footprint, a good customer base in Europe and also complementary engineering skills.

Wipro Infotech also inked a deal in 2006 to acquire India, Middle East and SAARC operations of 3D Networks and Planet PSG in an all-cash deal. This included an upfront cash payment of $23 million and additional performance linked payments based on achieving agreed financial targets over a two-year period. The company eyed 3D Networks’ strength in convergence technologies, existing customer base.

Sasken-Botnia

Telecom solutions firm Sasken Communication Technologies bought over Botnia Hightech Oy, a Finland-based provider of wireless services, for $45 million in an all-cash deal. Botnia is in the business of providing software, mechanical design and testing services to mobile handset vendors. This buy-out enables Sasken to widen its footprint across Europe.

Hexaware-FocusFrame

IT and BPO services provider Hexaware Technologies acquired FocusFrame, an ERP testing solutions provider for $34.3 million. Originally announced on November 6, 2006, under a definitive agreement, FocusFrame was acquired in an all-cash deal worth $34.3 million. With the closing of this acquisition, FocusFrame, Inc. became a wholly owned subsidiary of Hexaware Technologies Ltd.

TCS-TKS-Teknosoft

India’s biggest IT services company TCS took a 75 per cent majority stake in Swiss firm

TKS-Teknosoft for $80.3 million. This acquisition helps TCS expand its product offerings in the banking and financial services space. The Swiss company has two niche banking products, Alpha and Quartz, targeted at for the private banking and wealth management space. The deal would open doors to Swiss and French markets.

Geometric Software Solutions-Modern Engineering

Until recently, Geometric Software solutions, was content with providing PLM solutions for some of the leading vendors. When it decided this year, to increase its share of its services business, it decided to buy Detroit-based Modern Engineering’s engineering services wing for $32-million. The Modern Engineering deal would provide GSS with direct access to the North American engineering and manufacturing segment.

Aditya Birla Group-Minacs Worldwide

The Aditya Birla Group, which has Transworks BPO as one of its subsidiaries, acquired a Canada-based BPO company for $125 million. TransWorks bought Minacs's promoters' stake of 46.4 per cent. ReichmannHauer Capital Partners also co-invested with TransWorks. Minacs provides contact centre solutions, integrated marketing services and back office administration and has 6000 employees across Canada, US, UK, Germany and Hungary. Post-acquisition, the Minacs-TransWorks combo figure among the top 10 BPO providers in North America.

Sonata-TUI

Sonata Software paid €18 million (Rs 105 crore) in an all-cash deal for a 50.1 per cent stake into the Infotech arm of Europe’s leading travel and hospitality group, TUI. This move will open new vistas for the company in Europe, especially Germany. Besides, with Sonata’s offshore delivery centers in India, it can offer IT infrastructure management services and IT software services to the European market.

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