IT-BPO industry all set to dial in small-ticket acquisitions

As the $50-billion Indian IT sector comes out of the slowdown, small-ticket acquisitions in the sector are expected to take place this year. Players like L&T Infotech, Patni Computer Services, MindTree and Genpact are scouting for tuck- in acquisitions in a bid to get capabilities. Largely, scale has been a factor for acquisition for most IT firms. However, this perception is changing say industry viewers as filling in major capability gaps is becoming a priority for firms in a bid to attract and retain clients. Gaurav Gupta, principal and country head-India at Everest Group views that non-performing players could be up for sale now as valuations look feasible.?At the same time international players that lack in domestic IT footprint could look out for mid-segment firms.

According to Gupta, in the BPO sector a number of players would see the private equity investors exiting and this would be one area of action as pressure mounts up for the BPO provider. Players like WNS, Firstsource and 3i-Infotech are some of the key BPO players where private equity and other investors are expected to move out. While on the other hand IT services players though aren?t under any such pressure as promoters tend to hold strategic stakes in the firm, filling in gaps is increasingly becoming a priority. ?We are not expecting big-ticket mergers and acquisitions except for larger players with huge pile of cash and this might be far and few. However, there are players who are keenly looking at string of smaller acquisitions to fill up the capacity and we expect it to happen this year,? Gupta added.

Captive units and carve outs of firms at specific locations are increasingly becoming attractive as firms seek to fill special skill sets to address specific markets. Business process outsourcing firm Genpact and L&T Infotech that have been scouting for larger deals in the past too viewed similar sentiments. ?Tiger Tyagarajan, COO, Genpact, said, ?We are clearly looking at leadership skills and domain expertise in the industry verticals like insurance, banking, consumer products with geography presence in Europe could be an ideal deal.? Genpact recently acquired Symphony Mobile Services firm for about $ 34 million. ??

However, Sudip Banerjee, CEO and MD at L&T Infotech viewed that the firm was looking at a big ticket acquisition not just for capability but for scale as well. L&T Infotech has been trying to scale up in the past and had bid for Satyam Computer Services (now Mahindra Satyam). ?So besides capabilities, scale is important to us and we are not going to do a string of acquisitions but make it through a one time big acquisition,? Banerjee added. However, he did not divulge if the firm was already in talks with any player.