IT, ITeS M&As touch a crest in Jul-Aug

Written by Surabhi Agarwal | New Delhi, Oct 9 | Updated: Oct 10 2008, 08:41am hrs
July and August saw heightened merger and acquisition (M&A) activity in the IT and ITeS sector, in terms of deal size with over $1 billion worth of transactions compared to the first six months of 2008. There were around 19 deals in July and August with a total value of $1.07 billion.

However, the first six months of 2008 clocked a total value of only $645 million with 62 deals, according to research agency, Grant Thornton's DealTracker report.

According to industry watchers, the sector will continue to witness high action in the M&A space even though big-ticket acquisitions are expectedexpected to be fewer in number. "The sector should see a high volume of smaller deals in terms of M&A, as financingfinancing for larger deals is increasingly becoming a challenge with the credit crunch in the market," said Pankaj Karna, partner, M&A, Grant Thornton. Moreover, the recent dip in valuations will provide an impetus to both inbound and outbound M&As.

In these two months, the share of the IT/ITeS sector in the overall M&A value has increased to 36% compared to a meagre 4% in the January- June period. On Wednesday, India's largest IT service provider, Tata Consultancy Services (TCS) announced its acquisition of Citigroup's captive Indian BPO, Citigroup Global Services, for $505 million in an all-cash deal. This is the largest deal in the sector this year so far.

Earlier this year, Aegis BPO bought People Support for $250 million.

Other big M&A deals this year have been of WNS Holdings' acquiring Aviva Global services for $228 million, and Raman Roy's Quatrro BPO Solutions buying a 60% stake in UK-based Babel Media for $110 million.

The IT and ITeS sector also scored high in terms of private equity (PE) investments with the highest number of investments made in the sector in July and August. There were 16 PE deals in these two months with a total value of $150.25 million. On the other hand, the January-June period saw 29 deals, though the value was more or less same as in the July-August period at $151.62 million.