Global IT and Business Process Outsourcing (BPO) industry continues to witness large number of Merger and Acquisition (M&A) transactions early in the second half of year 2008. In July ’08, with a total of 133 transactions being announced, 30 of which were of significant size as against 40 in June ’08. These 30 deals in July were considerably larger than the 40 in the previous month on an average basis and hence, drove the total deal size in dollar terms to $3 billion against the $1.3 billion in June. Overall, the 133 transactions accounted for around $4 billion of acquisitions with an average deal size of $28 million.
Market dynamics, sub-prime crisis and unstable exchange rates have propelled the IT and BPO players to adopt a risk averse strategy, thereby diversifying the business into newer geographies. The U.S.-based companies continued to top the list both in terms of domestic and cross-border acquisitions followed by the U.K.-based ones. Japan and Brazil were more active on the domestic transactions, whereas Canada, India and Switzerland were more active on the outbound transactions. Germany and France witnessed more inbound transactions than outbound and domestic ones. The U.S. and the U.K. topped the shoppers’ list announcing most number of transactions both on own land and on foreign shores, followed by Japan, Canada, India, Germany and Switzerland.
One of the major deals July ’08 was Capgemini, a French IT-services provider acquiring the Netherlands-based business-application division of Getronics for $400 million. The acquisition is primarily to leverage the high concentration of public-sector customers served by Getronics PinkRoccade Business Application Services in the European region. In another large deal, Sophos, the U.K.-based IT player acquired German software company, Utimaco Safeware,employing over 300 people. The targets were valued at an average revenue multiple of 3x signifying a premium of over 200 percent on their total revenue. Other major acquisition of the month is WNS Holdings, the U.S.-based BPO major with large India presence, acquiring the four offshore BPO centers of the U.K.-based insurance major Aviva Global Services for $230 million. The deal will further ramp up the resources of WNS in India
and Sri Lanka.
During the month, acquirers based in the U.S. contributed to 30 domestic and 22 cross-border deals spread across the U.K., France, Germany, New Zealand, Switzerland and Ireland. Acquirers based in the U.K. slated out seven domestic and 10 cross-border deals spread across the U.S., Australia, France and Germany.
Amongst the target geographies, the U.K. and Germany — after the U.S. — seemed to be the markets of next best interest.
| Mega M&As of JULY '08 |
| Acquirer |
Target |
Area |
Deal size ($Mn) |
| Capgemini |
Getronics PinkRoccade Business Application Services |
IT services |
400 |
| IBM |
Ilog |
IT software |
340 |
| Sophos |
Utimaco Safeware |
IT software |
340 |
| Convergys |
Intervoice |
IT services |
335 |
| WNS Holdings |
Aviva Global Services |
BPO |
230 |
| Cisco Systems |
Pure Networks |
IT software |
120 |
| BT |
Ribbit |
IT software |
105 |
| Avocent |
Touchpaper Group |
IT services |
45 |
| SemanticSpace |
Prolofics |
IT solutions |
40 |
| BT |
Ufindus |
Internet |
40 |
| Interwoven |
Discovery Mining |
IT software |
36 |
| Allied Digital Services |
Enpointe Global Services |
IT services |
30 |
| Know IT |
Net Result Consulting |
IT consulting |
29 |
| Avocent |
Ergo 2000 |
IT software |
28 |
|
Reply SpA
|
glue: |
IT consulting |
18 |
| SI International |
Arrowpoint |
IT services |
16 |
| Open Text |
Spicer’s format viewer software division |
IT software
|
12 |
| Ariston Global |
ACE*COMM Corp. |
IT services |
12 |
| Know IT |
Helikopter Systemutveckling |
IT software |
6 |
| Micro Focus International |
Liant Software |
IT software |
5 |
| BT |
Stemmer |
IT software |
— |
| BT |
SND |
IT services |
— |
| COMSYS IT Partners |
Symmetry Workforce Solutions |
IT software |
— |
| Imtech |
Ebit |
IT services |
— |
| Imtech |
Thinking Solutions |
IT services |
— |
| Luxoft |
ITC Networks |
IT services |
— |
| Fluensee |
TrenStar Tracking Solutions |
IT software |
— |
| Wolters Kluwer |
Compliance Online |
Internet |
— |
| Oracle |
Global Knowledge Software |
IT software |
— |
| Quatrro BPO |
Babel Media |
Gaming |
— |
|
Source: Tholons
|
