Reports from brokerage firm Motilal Oswal show that the acquisition is for a total cash consideration of $250 million, out of which $50 million being conditional pay outs.
Indian IT major Infosys has announced a definitive agreement to acquire Simplus, one of the fastest growing salesforce platinum partners in the US and Australia. Simplus offers cloud consulting, implementation, data integration, change management and training services for salesforce quote-to-cash applications. Reports from brokerage firm Motilal Oswal show that the acquisition is for a total cash consideration of $250 million, out of which $50 million being conditional pay outs.
According to analysts at Motilal Oswal, this acquisition, coupled with the acquisition of Fluido announced in September 2018, should help Infosys become an ‘end-to-end’ salesforce enterprise cloud solutions and services provider. Reports from the brokerage suggest an approximate 40% growth rate for this entity and this integration is expected to contribute to roughly 0.7%-0.8% revenue growth for Infosys next year.
The analysts also expect a margin not more than 10% for this new entity in the best case, which would affect the overall margins to fall between 22%-23%. This means an approximate 10 basis point margin compression at an overall level. Given the estimated impact this would have on Infosys’ larger financials, analysts view this deal as only a capability tuck in.
Commenting on acquisition, Ryan Westwood, CEO & co-founder, Simplus, said, “We have viewed this partnership from a culture-first lens from the beginning, and we believe that the alignment of our company values, and the preservation of our company DNA will allow us to accelerate growth and together become the strongest and most respected partner in the salesforce ecosystem.”
Simplus, with roughly 500 salesforce consultants, brings to Infosys a broad clientele, across a variety of industries including high-tech, financial services, retail, healthcare, life sciences and manufacturing. It has offices across North America, Sydney, Melbourne, London, and a large delivery centre in Manila.
Talking about the deal, Pravin Rao, chief operating officer, Infosys, said, “This acquisition is key to staying relevant to the digital priorities of our clients and demonstrates our commitment to the salesforce ecosystem. The strategic combination of scalable and agile global delivery capabilities of Simplus complements our effort to help global enterprises to transform their businesses. We are excited to welcome Simplus and its leadership team into the Infosys family.”
The acquisition is expected to close during the fourth quarter of FY20, subject to customary closing conditions. After the announcement, infosys’ target price went up 13% to Rs 870 and analysts at Oswal Motilal indicate ‘buy’ on the company’s shares.