India?s largest business process outsourcing (BPO) firm Genpact has acquired US consulting and information technology (IT) services company Headstrong for $550 million (R2,500 crore).
The transaction, which is being funded by a combination of existing cash and acquisition financing, is expected to close by May 31, 2011. Genpact had $481 million of cash till the end of the quarter ended December 31, 2010.
The BPO had earlier acquired Symphony Marketing Solutions in 2010, mortgage firm Money Line Lending Services in July 2006, SAP service provider Ice Enterprise Solutions in March 2007 and Axis Risk Consulting Services in June 2007.
Headstrong has nine of the world?s top 10 investment banks and three of the top five asset managers as its clients besides having an emerging practice in healthcare administration. Headstrong has approximately 3,700 employees in seven countries and generated revenues of approximately $217 million in 2010. Genpact expects Headstrong?s long-term growth rate to be in excess of 20% per year.
?Headstrong is a complementary high-growth business, built by talented leaders, that is an excellent fit strategically, financially, operationally and culturally. With this acquisition, we are gaining critical domain and technology expertise in the complex, but highly attractive, capital markets industry vertical,? said Pramod Bhasin, president and CEO of Genpact.
Analysts see the deal as an endorsement of Genpact’s business model. ?This deal proves the validation of its business model as a pureplay BPO firm as BPOs buying out IT firms gives them incremental revenues besides good convergence,? said Alok Shende, principal analyst and founder director Ascentius Consulting.
Citigroup Global Markets Inc and UBS Securities LLC acted as the financial advisors to Genpact in this transaction and Cravath, Swaine & Moore LLP was outside legal counsel while Morgan Stanley & Co. had been as exclusive financial advisor to Headstrong with Kirkland & Ellis LLP acting as its legal counsel.