Infosys looking to buy

Infosys looks to acquisitions to expand presence in Asia and Europe. Consultancy companies also seen as a good fit for InfosysÆ expanding business.
Software services company Infosys is generally considered the flagship of the Indian IT sector. Established in 1981 by seven Mumbai engineers with an initial investment of $250, it has seen enormous growth that continues at an exponential rate. In the fiscal year ended March 2000, for example, its profits rose 102% to $61.34 million. 

It has until now stuck with an organic growth strategy, but co-founder and member of the board S. Gopalakrishnan says that this has changed and the company is now in acquisition talks with several companies whose identity it is not willing to reveal at this stage

“We have not done any acquisitions in the past and that’s why we think it’s a skill we’ve got to learn,” he says. “Right now growth is not a problem, we’ve been growing agressively. But sometime in the future if growth comes down maybe we’ll need to grow by acquisition. It’s a skill any large company needs to have.”

When looking at a potential acquisition Gopalakrishnan says the target company has to meet some important requirements, such as having a core competency that would round off Infosys’ services or allowing Infosys to expand in certain strategic geographies.

“Currently about 75% of our revenue comes from our US business and we’re trying to see if we can increase Europe and Asia so that the US comes down to about 60-65% of our business,” he says. “When we look at acquisitions we’re looking for a faster entry into Europe or Japan.”

Infosys is also looking at acquisitions to increase its presence in the consulting industry, particularly in business consulting. “Long term we want to provide end-to-end solutions starting from consulting, going into systems specifications, systems development, implementation, maintenance and support,” says Gopalakrishnan.

Buy, buy, buy

A few of the major Indian software and services companies - Silverline Technologies, Aptech and SSI - have recently been busily acquiring IT companies in Asia and the US. The largest deal to date, on 23 October, was New-York listed Silverline Technologies’ announcement that it will acquire Nasdaq-listed SeraNova in an all-stock deal valued at approximately US$99 million.

But while there’s lots of action on the M&A front, Gopalakrishnan says that there’s still enough room for all the Indian software players to find what they’re looking for. “They’re out looking for much smaller acquisitions,” he says of the other Indian companies. “Plus, everybody’s focus is slightly different. Different companies have different reasons for acquisition. We’re really not competing in that sense,” he says.

Some of the recent deals, such as SSI’s acquisition of US IT services company AlbionOrion, have included large cash payments. But Infosys plans to use stock as the mechanism for funding its acquisitions.

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