IT sees dip in M&A deals in value terms

IT sees dip in M&A deals in value terms

By SiliconIndia   |   Tuesday, 25 March 2008, 13:35 Hrs
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New Delhi: The cross border merger and acquisition (M&A) deals in the Indian IT industry have seen a dip in terms of value this year by half compared to the previous year. The total value of cross-border deals in this space stood at over $203 million during the first two months of 2008, less than half the levels in the same period of previous year, although the number of deals was marginally higher, reported Business Line.

The companies clinched 18 M&A deals in the cross-border category (where Indian IT/BPO companies acquired overseas firms or vice versa) during the period from January to February of 2008. Of these, 14 were outbound transactions. In the corresponding period of previous year, the number stood at 15, with 10 outbound deals fetching $520 million, according to advisory firm Grant Thornton.

"The correction is being driven by the dollar play as well as the global meltdown. The IT stocks are coming off their highs and the companies are also tightening their belt," Harish H V, Partner- Corporate Advisory Services, Grant Thornton, said.

HCL Technologies' acquisition of U.S based CapitalStream, in an all-cash deal of about $40 million, was a notable among various deals. NIIT Technologies announced the acquisition of Germany based SofTec GmbH, a specialist in IT solutions and services in the airline revenue accounting and operations space.

Another all cash deal was by Satyam Computer Services, which announced the acquisition of a Chicago based management and consulting firm Bridge Strategy Group, for $35 million.

Adding another deal to the list, Mindtech (India) acquired Infotech Consulting, a Pennsylvania based multi-disciplined technology services firm for $21 million.

"The liquidity in the market has dried up and that has accounted for a drop in M&A activity. In addition, since the valuations are down, many companies that were on the block to be acquired are also waiting and watching for the situation to stabilize," said Avinash Vashishta, MD of Tholons, an offshore advisory.

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