The $4.6-billion IT major Cognizant on Tuesday announced the acquisition of Zaffera, a US-based SAP retail consulting and software development firm, for an undisclosed amount.
The purchase, made to acquire skills rather than scale, will boost Cognizant?s expertise in the retail vertical, IT analysts told FE. Analysts put the deal size at $40 million
Analysts pegged Zaffera?s revenues at between $16-20 million, considering it has 100 employees, and estimated a valuation between 1.5-2 times the top line.
The acquisition will still not help the firm close its top line gap with Infosys, which closed the last financial year with a top line of $6 billion. Cognizant had edged past Wipro in Q2, thus rearranging the Indian IT services pecking order.
R Chandrasekaran, president and MD, global delivery, Cognizant, said that the impact of the acquisition on Cognizant?s 2011 revenue is not material. ?We have acquired the company along with its 100 people and SAP focused tool sets. Zaffera?s rich talent pool has an average of 12-plus years of experience in the SAP retail space, which is a key differentiator and an advantage,? he told FE.
Cognizant does not break out its revenues from the retail vertical but it derives over 20% of its global top line from retail, manufacturing and logistics. Its retail practice is among the company?s fastest growing verticals.
The firm serves retailers in North America, Europe, and Asia-Pacific. These include 12 of the top 30 global retailers. Post the merger, the two firms can deliver end-to-end SAP solutions to the world?s leading retailers, Chandrasekaran said.
Market reads the move as Cognizant?s effort to diversify away from banking and financial services, its largest vertical that brings in 41% of its revenues.
The market for BFSI could shrink over the next five years, many believe. While there is no spending freeze, rival Infosys is seeing volume downtrend among banking clients already, Standard Chartered recently noted.