While company officials refused to comment on the M&A strategy, merchant bankers pointed out that HCL Technologies has some major non-organic growth plans, i.e., mergers and acquisitions which will help the company outperform industry expectations. The targets will include companies that can be successfully overlaid with HCL Technology's business model.

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-enable technologies, business consulting, IT consulting, systems integration, applications development and ERP consulting and implementation.According to merchant banking sources, the company is looking at targets in the US, Canada, Europe, Japan, Korea, Australia and New Zealand.

A key feature of HCL Technology'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 acquiree and bringing in constructive change in the organisation so acquired. HCL Technologies, say merchant bankers, is planning all these elements in the right earnest. ``HCLTechnology is serious about the wedding, which is common in the world of M&A, what is rare is they are equally serious about the marriage.''

HCL Technology'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 HCL Technology's business-model, whose market technology access is in synergy, has a good technology penetration in the local market and a high value customer base. Low-cost software development capabilities and efficiencies in servicing are also important. ``Although HCL Technologies might not find all these positives all the time, the presence of some of these features in the target company should work well for the future of the company,'' said the banker.

HCL Technologies is currently working on ways to acquire intellectual property rights, customer base and keypersonnel from such multinationals, at the same time entering 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, earlier 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.