Hmmmm, I’ve been on the road and hadn’t read about the rumor that Infosys is planning an Atos buy until I spoke to a friend at a private equity. Is this speculation or does he, as an investment “insider”, see this as a possible reality, I asked him. A “definite” possibility was his response.

 

A quick search on Google revealed that there are two clear camps of speculators: Infy will acquire Atos, and Infy will not acquire Atos. Neither camp is armed with facts, though each is examining the history of Infosys and Atos and making predictions.

 

Amusingly, both parties are using the same “reasons” to cite Infy’s inclination and disinclination toward an Atos purchase. See the table below. 

 

Reason	Has purchase intent	Does not have purchase intent
Infy’s growth model	Infy has been slow to grow inorganically (unlike Wipro and TCS), and it now wants to go in for a big kills	Infy lacks a culture of inorganic growth, therefore it will not go for a big kill as one of its few early purchases; it will experiment with smaller companies first
Atos’ weak performance	Since Atos has had a poor performance over the last few quarters, Infy will be able to close a lucrative purchase	Since acquiring a poorly performing company would mean investment in turning it around, Atos is a poor acquisition choice. Investing in it would dilute Infy’s earnings
Infy’s European aspirations	Atos will give Infy a good foothold in Europe. Atos’ has a stronghold in three of the largest European markets: France, Netherlands and the UK	To expand in Europe, Infy would consider a pan European company (like Capgemini—there were rumors a few months ago that Infy was indeed looking to acquire a stake in Capgemini)—and not a company with more of a regional presence such as Atos (which is primarily focused on the French, Dutch and UK market)

 

One Response to “Smoke Without Fire? Buyer Without Seller?”

1. Mohit says:

   October 3, 2007 at 2:51 AM

   I think Atos has little to offer to Infy by way of additional offshore work. Infy has a much bigger name in offshoring than Atos and it will be cheaper for Infy to expand its own offices in France and the Netherlands than to buy Atos’s setup in these countries. Atos has strong relationships with companies for local onshore business. If that is a service offer that Infy wants to develop, then Atos may be a good target. But I have not heard of any statements from Infy about intentions to develop local service offers. They probably have a big enough offshore pipeline to manage today.

   In any case, no Indian compay can afford to underestimate the cultural challenges in integrating a European company in its fold (or vice versa!) .

   Reply