M&A’s Golden Run

would be the perfect buzzword to epitomize the dynamics of the global IT
industry in 2005. The year was replete with myriad tales of acquisitions ranging
from high profile ones such as Oracle-Siebel, Oracle-i-Flex, Citrix-Netscaler,
Lenovo-IBM Personal Computing Division to relatively smaller ones such as IBM-NetSol
and Symantec-Bindview. The situation was no different for the Indian IT
industry-though M&A had started here in earnest two years back, what
differentiated 2005 was that it assumed a more secular nature.

While the top players
such as TCS, Wipro, and Satyam remained aggressive on the acquisitions front,
even mid-tier companies such as MBT, MphasiS, and Zensar joined the bandwagon;
and if this was not enough, most heartening was the active participation (some
would say even more than Tier one and two) of the smaller Tier three companies
on the global M&A marketplace. Though it must be mentioned that each
category was influenced by its own agenda.

Goliaths Set the Pace
Starting with the biggies, the companies of Indian origin with revenues in
excess of Rs 1000 crore, acquisitions implied niche additions to their bouquet
of offerings. Rather than make big-bang acquisitions, these companies were keen
on purchasing parts of companies or small firms and following the ‘diamond in
the tiara’ strategy. Having already achieved a significant scale of size,
looking at acquisitions to scale up was less of an influencing factor.

2005 M&A Dossier for the Rs 1000 crore+ Companies

Nature of Deal

Deal Financials


Acquired Financial Network
Services (FNS)

$26 mn

Acquired Comicron

$23 mn all-cash deal

Acquired life insurance and
pensions BPO division of Pearl Group

£55 mn to be paid over four
years for more than 75% stake in the JV

Formed JV company, C-Edge

Starting with an authorized
capital of Rs 40 crore

Tata Infotech merged into TCS

A stock swap whereby
shareholders of Tata Infotech received one equity share of Re 1 each of
TCS for two equity shares of Rs 10 each


Acquired mPower and MPACT
Technology Services, a JV between MasterCard and mPower.

$28 mn all-cash deal

Acquired NewLogic

$56 mn in all-cash deal


Acquired Citisoft

Guaranteed payment of $23.2 mn
payable over a three-year period and an additional performance based
payment of up to $15.5 mn, also to be paid over a three-year period.

HCL Technologies

Acquired AnswerCall Direct

Rs 29.4 crore 
(£ 3.9 mn)

Acquired the remaining 16.3%
stake in HCL Enterprises Solutions (HES)

Barring Infosys and
Patni, all other players in this category indulged in M&A, though to a
varying extent, discounting Infy acquisition of IQ Financial treasury module
product. Patni was probably still assimilating the acquisition of Cymbal made in
2004. Though Cognizant did acquire US-based Fathom for $35 mn in cash and stock,
it has been kept out of the list since it is not of Indian origin. Though i-Flex
was active on the acquisitions front in the initial half of the year,
subsequently it got acquired by Oracle and is therefore, left out of this

  • TCS: Barring the
    CMC acquisition in 2001 and minor ones such as AFS and Phoenix, TCS has
    traditionally shied away from the inorganic growth route. However, all changed
    in 2005; it made a spate of acquisitions and strategic JVs, but all with a
    specific game plan in place. The idea was to emerge as the king of IT services
    and BPO for the BFSI domain-the agenda to grow verticalized platform-based
    expertise was expected to catapult TCS to the league of IBM and EDS. The
    acquisition of Sydney-based $22 mn core-banking solution vendor Financial
    Network Services (FNS) enabled TCS to offer core-banking solution globally and
    compete against Infy’s Finacle and Flexcube from Oracle’s i-Flex.
    FNS came with an
    install base of 116 banks spread over 35 countries; the client roster included
    three of India’s major banks including SBI. This acquisition was carried to
    its logical conclusion when TCS and SBI in a 51:49 JV formed a new company
    called C-Edge Technologies. This JV is expected to leverage experience TCS has
    gained in FNS core-banking rollout in SBI and play a key role in FNS deployment
    in India and globally.
    If acquisitions
    bolstered the BFSI business in IT services, the fillip to insurance came from
    the BPO side. The acquisition of the life insurance and pensions BPO division of
    UK-based Pearl Group leading to a JV company based in Peterborough enhanced TCS’
    verticalized insurance BPO business in UK. Comicron also allowed the TCS Chilean
    team in Santiago to complement its existing team in Uruguay to serve not only
    the rest of the Latin American countries, speaking Spanish, but also the Spanish
    speaking market in the US-the Portugese speaking Latin America is served by
    TCS centers in Rio and Brasilia.
    Beyond BFSI, the
    merger of Tata Infotech into TCS probably marked the beginning of the
    consolidation of all the Infotech companies in the Tata group. In addition, it
    offered TCS strong SI expertise in the domestic defense and manufacturing

  • Wipro Technologies:

    Since acquiring NerveWire in April 2003, Wipro broke its dormancy on the M&A
    front by announcing two acquisitions within one week in December-Austrian
    chip-design firm NewLogic and US-based e-payment solution vendor mPower for $56
    mn and $28 mn respectively, in separate all-cash deals. The NewLogic acquisition
    further bolsters Wipro’s R&D expertise and geographic advantage in
    Europe-with 32% of its revenues in FY05 coming from R&D and boasting of
    customers such as Infineon and Philips, this has been Wipro’s key
    differentiator from TCS and Infosys. In addition, Europe contributed 9% of
    Wipro’s revenue for R&D services in embedded products, a number expected
    to increase following NewLogic’s customer base in Europe.

    2005 M&A Dossier For the Tier 2
    (Rs 300-1000 crore) Companies

    Nature of Deal

    Deal Financials


    Acquired Axes Technologies

    $54 mn in an all-cash deal


    Acquired Princeton Consulting

    $14 mn all-cash deal

    Acquired Eldorado Computing

    $16.5 mn all-cash deal


    Acquired OBT Global

    All cash deal but size of transaction not revealed

    The acquisition also
    gives Wipro the intellectual property, services, and the expertise in the
    communications R&D business with NewLogic’s cores being used in complex
    wireless applications such as WLAN and Bluetooth. This enables it to compete
    directly with QualCore, a semiconductor design services company with major
    operations in India. Similarly, the mPower acquisition brings to the Wipro
    stable deep domain expertise in the e-payment space, an offshore arm in Chennai
    and a blue-chip client like MasterCard. The deal to acquire the $18 mn
    Princeton-based mPower also involves Wipro taking a 100% stake in MPACT
    Technology Services, a JV between MasterCard and mPower.

  • Satyam: With the
    acquisition of Citisoft, Satyam positioned itself as a significant global player
    in business and technology consulting services arena for the Investment
    Management Industry. With a client base of more than 75% of the top 50 global
    asset managers and multi-national presence in Boston, London, and New York,
    Citisoft enables Satyam’s Financial Services Group (FSG) to effectively tap
    the $35 tn investment management segment. On the M&A front, equally
    significant for Satyam was its final exit from Sify; though it did not acquire
    any other company in 2005, strategic alliances were the order of the day-these
    were forged with Merdian Systems, Miebach Logistics, IONA, and POSC amongst

  • HCL Technologies:

    Though HCL has been following an aggreesive M&A strategy the last two years,
    2005 did not witness much activity except the acquisition of AnswerCall Direct,
    a Northern Ireland-based contact center, for Rs 29.4 crore. On the IT services
    front, HCL acquired the remaining 16.3% stake in HCL Enterprises Solutions (HES),
    its joint venture with US-based Computech, to make it a wholly owned subsidiary.
    The company is now fully owned and managed by HCL Technologies (Illinois). The
    acquisition enabled HCL Technologies to gain a strong onsite presence in the US
    ERP market.











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    M&A Dossier for the Tier 3 (

    Nature of Deal

    Target Company

    Deal Financials


    KPIT Cummins

    Acquired SolvCentral

    This Washington-based
    BI solution vendor grossed revenues of $3.5 mn

    $2 mn in cash and

    Strengthens KPIT’s
    BI practice by creating a new LoB and bolsters its US presence

    Acquired Pivolis

    A Paris-based company
    providing offshore consulting services using Agile Offshore Software
    Development Methodology

    And grossing a
    revenue of 3.5 mn

    €1.75 mn comprising
    50% cash and 50% stock

    Strengthens KPIT’s
    presence in the BFSI vertical and opens up the French-speaking
    European market

    Tata Technologies

    Acquired INCAT

    This $120 mn UK-based
    vendor offers engineering and design services as well as PLM products
    and services

    Rs 416 crore cash

    Bolsters Tata
    Technologies offshore capabilities in engineering automation with its
    high-end onshore strengths and brings customers such as
    DaimlerChrysler, Ford, Lotus, Grumman, Honda, Magna, Steyr, and Boeing

    Aztec Software

    Acquired Disha

    This Rs 14.14 crore
    company was providing independent testing services

    Around $12 mn

    Enables Aztec to
    offer testing services

    Geometric Software