Cognizant scouting for acquisitions

Written by P P Thimmaya | Debojyoti Ghosh | Debojyoti Ghosh | Bangalore | Updated: Aug 8 2013, 18:12pm hrs
Cognizant, the US headquartered IT services company, is scouting for acquisitions in the range of up to $200 million, which would bring significant complementary capabilities for the rapidly growing corporate, which is expected to end the 2013 fiscal with a revenue of $8.74 billion.

Cognizant follows an acquisition strategy, what it terms tuck under, which is about shopping for a series of smaller firms in a consistent fashion. Talking to FE, Cognizant group chief executive (technology & operations) R Chandra Sekaran said, We continue to look for acquisitions which is complementary to us and brings in newer capability in terms of domain, consulting or geographic reach.

Cognizant, which ended the June quarter with cash reserves of $2.9 billion has made smaller acquisitions in the recent past. For example, it acquired SourceNet Solutions from its financial services clients BNY Mellon which got them processing platform capability for its BPO business.The SourceNet acquisition is expected to add $10 million in revenue for Cognizant by end of the fiscal.

Similarly, it had acquired MediCall, a provider of outsourced clinical services with headquarters in US and major operations in Philippines.

Acquisitions are expected to play a key role in Cognizants growth as the IT services major has stated that the C1 and Medicall buyouts are expected to bring about $90 million of incremental revenue for the year.

Acquisitions has been a core strategy for all IT majors like TCS, Infosys, Wipro and HCL Technologies and all of them have been following the plan of buying companies which would be smaller making it easier to integrate while giving them a stronger foothold in markets of US and Europe.

The Cognizant CEO said the company would not restrict itself just to garner capability but also look at companies which would give them certain market access. He cited the example of C1, which has given the company significant inroads into Germany and Switzerland along with cross selling of services of both the companies.

In December, 2012, Cognizant had acquired six companies of German IT consulting and services firm C1 Group for an undisclosed amount. The C1 Group had about 1,200 employees and a reported revenue of 200 million euros for the calendar year 2011.

Europe has been a major focus area for Cognizant, especially the Continental region which generated 17.9% revenue at the end of second quarter. Sekaran said, It is a long term bet and one needs to have patience to stay invested. We are taking an aggressive approach to expand our presence.