The company plans to utilise a substantial part of its issue proceeds for acquisitions and strategic alliances, in India and abroad. HCL Technologies will primarily target businesses which have interest in e-commerce, web-enabled technologies, business consulting, IT consulting, systems integration, applications development and ERP consulting and implementation. According tomerchant-banking sources, the company is looking at targets in the US, Canada, Europe, Japan, Korea, Australia and New Zealand.

A key feature of HCLT's M&A strategy is what merchant bankers call a ``soft approach'' that does not end with acquisition of a company, neither does it involve hostile takeover tactics. ``IT is a human-skill intensive business. So it's extremely important for the acquiring company to take into consideration the varied cultures of companies in different global set-ups and make the transformation very very cautious,'' said the source. ``It's easy to acquire a company, but to make the expected synergy of the merged entity work calls for experiences of a different genre.''

The M&A soft approach usually includes the process of identifying the target, of integrating the company into the acquire and bringing in constructive change in the organisation so acquired. HCL Technologies, say merchant bankers, is planning all these elements in the right earnest. ``HCLT is serious about thewedding, which is common in the world of M&A, what is rare is they are equally serious about the marriage.''

HCLT's M&A plans envisage, among others elements, to acquire non-performing assets, non-performing departments and/or even non-performing products of other IT companies.

The company is looking at listed companies which are performing below the market average, could be successfully overlaid on HCLT's business-model, whose market technology access is in synergy with HCLT, has good technology penetration in the local market and has high value customer base. Also low-cost software development capabilities and efficiencies in servicing are also important. ``Though HCLT might not find all these positives all the time, but the presence of some of these features in the target company should work well for the future of the company,'' said the banker.

HCLT is currently working on ways to acquire intellectual property rights, customer base and key personnel from such multinationals, at the same timeentering into an agreement to support their present customer base.

As part of its ``soft approach'' to M&A, the company is also considering joint ventures/alliances which can be used as an effective route for acquisition later. For instance, it had entered into a JV with James Martin to set up HCL James Martin with a 60:40 equity structure in favour of HCL Technologies. This JV was primarily engaged in Y2K solutions, which has outlived its purpose. Early this year HCL acquired the 40 per cent stake from James Martin and the company now has shifted focus to IT consulting.

Although the source refused to divulge more than what is available in its IPO prospectus, it is reliably learnt that HCLT has already set up an M&A team which is currently working on various deals.