Just six months after acquiring UK-based SAP consulting major Axon Plc for around ?440 million, the country?s fifth largest software firm, HCL Technologies, has entered into a strategic partnership with South Africa?s UCS Group. As part of the all-cash deal, HCL will acquire UCS?s enterprise solutions SAP practice focused on the retail sector for $ 7.7 million.
Ram Krishna, corporate vice-president and head of enterprise application services, HCL Technologies, said that the acquisition would help the company offer SAP consulting services to the retail sector in South Africa and other key markets globally. “With Axon’s strengths in the utility, energy and government space, we felt the need to have robust offerings in the retail sector. This is in line with our aim to become the top three players globally in the SAP space,” he said.
Krishna said the acquired arm would operate under the retail division of HCL Axon. The transaction is expected to become operational by August 1, and will entail a growth centered earn-out over the next two years. “Besides an upfront cash payout of $7.7 million, we will offer them an earn-out linked to a certain growth over the next two years. But, the cap of the total payment will be at $18.5 million, which includes the acquisition amount.”
While Krishna declined to share the revenues of the arm, he said revenues for the full year at the current operational run rate could be around $8.75 million. As part of the agreement, 67 employees of the retail-SAP arm of UCS will move to HCL Axon along with the arm’s clients. The move will give HCL a footprint in the South African market along with marking its entry into the retail-SAP space.
Krishna said that the company had six large retail chains in South Africa as its clients.