Big M&As In Indian IT Sector Often Don't Deliver: JP Morgan
New Delhi: Big-ticket acquisitions in the Indian IT sector do not live up to the expectations in most cases due to factors like management team exit of target companies and a hurried integration process, says a report.
As per a study by investment banking major JP Morgan of all M&A deals valued at $500 million or above, the "feel- good factor" that the prospect of a large acquisition sometimes induces may be "more psychological" and may not square with the subsequent track record.
"Large mergers/acquisitions in this sector, much more often than not, don't live up to the expectations of the acquirer. Damned if you do, damned if you don't - this phrase seems to epitomize the large-scale M&A action in the Indian IT/BPO outsourcing space," JP Morgan said in its report.
Big-ticket M&As in Indian IT ordinarily have several objectives like introducing or raising growth profile in a distinct new function, selling the acquired capability into the broader base of the acquirer's existing clients and achieving sufficient scalable offshore flow-through over time to scale and break even on margins.
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