M&A Activity in the Apr-June quarter

Wednesday, 09 July 2008

Large BPOs were the most aggressive acquirers with the largest share (56%) in the total number of deals recorded this quarter

Quarter Highlights

Parameters	Apr-Jun 2008 (This Quarter)	Jan-Mar 2008 (Last Quarter)
Number of deals	35	45
Average value of deal	$3.78 b	$153.1 m
Larger deals	o HP acquires EDS for $13.9 b and 41,000 employees o ING Group acquires CitiStreet for $900 m and 3,700 employees o Morneau Sobeco Income Fund acquires Shepell-fgi for $321.9 m and 1,150 employees	o Global BPO Services Corp. acquires Stream Holdings Corporation, with 16,000 employees o AECOM takes over Earth Tech, with 2007 revenues of $1.3 b and 7,000 employees, for $510 m. o CSC acquires First Consulting Group for $365 m.

Source: ValueNotes Outsourcing DealTracker

Indian Companies Vying to Build Consulting Expertise

Acquirer	Target Company	Location	Acquired company's services	Deal Size
Satyam	Market Research and Customer Analytics (MR&CA), a division of Caterpillar Inc.	Illinois, US	Market research and consultancy services	$60 m
Cognizant	Strategic Vision Consulting	California, US	Consulting and system implementation for media and entertainment companies	NA

Source: ValueNotes Outsourcing DealTracker

The largest acquisition in the Q2 2008 was by HP, which acquired EDS for $13.9 b.
The total number of acquisitions recorded by ValueNotes this quarter was 35 (Apr-Jun 2008), compared with last quarter's 45 (Jan-Mar 2008).
The average acquisition size this quarter was $3.78 b, much higher than $153.07 m last quarter. However, this quarter, the average deal size was skewed due to the $13.9 b takeover of EDS. If this deal were to be excluded, the average deal size would come down to $164.29 m.
Human Resource services companies were attractive targets again this quarter, with 9 deals recorded in this space compared to 10 deals recorded last quarter.

In this quarter (Apr-Jun 2008), there are instances of Indian companies trying to build top-end consulting and analytical expertise by way of acquisitions. Some of the acquisitions are recorded below:

Global companies like Accenture, IBM, CapGemini initiated their outsourcing business after being recognized as leaders in consulting services. The path towards gaining scalability in their offshore operations has been a relatively smooth ride for these majors. On the other hand, Indian outsourcing companies began as software service providers, went on to add offshore scale and then progressed towards adding onshore delivery. There has been a desperate need felt by these companies to add consulting services to their portfolio as a natural move towards providing higher value in the form of 'end-to-end' service offerings. The degree of difficulty faced in creating this differentiator around consulting has been evident in the continued lower share of consulting in the total business of biggies like Infosys, Wipro, Satyam and others. The consulting division needs a strong front-end presence and branding. With Indian companies foraying into consulting services, we see an acquisition trend gaining traction.

The above article is an excerpt from the ValueNotes Outsourcing DealTracker. To know more, contact This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

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