INDIA BUSINESS WORLD - APRIL 1st - APRIL 15th - 2008
IT-ITES SEES 23 M&AS AT $287 M IN JAN-MARCH 2008, DECLINE IN CROSS-BORDER DEALS
The IT-ITeS sector wait-and-watch mode to ascertain the impact of the US subprime crisis has had a dampening effect on cross-border deals involving Indian companies in the January-March quarter this year. The sector witnessed cross-border deals worth over $287 million in the quarter, less than half of $596 million in the same quarter in 2007, according to data by Grant Thornton.
In the January-March quarter this year, the IT-ITeS sector witnessed 23 cross-border deals, the same as the corresponding quarter of the previous year. These include IT services firm Mascon Global’s $55-million acquisition of two US-based companies—Jass & Associates and SDG Corporation, Mastek’s acquisition of enterprise solutions firm Systems Task Group International for $29 million and AurionPro’s acquisition of Sena Systems, all of which were struck in March.
Other acquisitions during the quarter were HCL Technologies’ $40-million acquisition of banking software firm Capital Stream, Satyam Computer Services’ $35-million buyout of consulting firm Bridge Strategy Group and Mindtech’s $21-million purchase of Infotech Consulting. Analysts say companies are delaying deal closures to figure out the impact on their businesses as well as in the hope for better valuations. “Companies are not taking decisions for two reasons. One, they’re hoping for valuations to get even better as valuations have take a beating globally. The other reason is that they are still evaluating how much their businesses are going to be affected by the crisis in the US,” said CG Srividya, partner - corporate advisory services, Grant Thornton India.
Last year, the most notable deals in the same quarter included Subex’s $164.5 million acquisition of Canadian firm Syndesis Ltd, HOV Services’ $148-million buyout of BPO Lason and Teledata Informatics’ acquisition of eSys Technologies for $105-million. In the same quarter, enterprise solutions major Oracle acquired i-flex for an undisclosed sum With Indian IT majors starting to report their annual results and guidance for the fiscal 2008-09, greater clarity is expected to emerge about the impact of the slowdown in the US on the Indian ITITeS sector. “The earnings announcement by Indian IT majors would affect valuations in the domestic market. With the situation in the US becoming clearer by April-end, we see the deal flow picking up by the end of the second quarter,” said offshoring advisory firm Stradling Global Sourcing managing partner Pradeep Mukherji.
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