IT companies still hungry for foreign buys

[dhilipkumar]

           Amid a global credit turmoil, Indian IT companies are treading the deal street. According to the latest deal tracker by Grant Thornton, the number of outbound deals was higher than the inbound deals—a reflection that India Inc was willing to acquire companies despite growing fears of a global slowdown.

Till August—just before the financial market meldown—more than 10% of the deals in the M&A space was in the IT sector against 3.91% last year.

Dealmakers are understood to be giving the finishing touches to two more deals—the outcome of which would influence the inorganic strategies of other IT firms.

HCL and Infosys are currently in the middle of a bidding war to acquire Axon, a UK-based SAP consultancy firm; besides, the grapevine has it that the local software giant TCS in talks with Citigroup to buy its BPO arm.

The two deals would be together worth $1.4 billion. If these deals fructify, the total value of IT deals this year would be more than double the value of last year's $2.9 billion.

Till August, IT and ITeS stayed on top of the M&A deal space clocking 81 deals with a combined value of $2.53 billion.
The outbound deal activity in the IT & ITeS sector has gained momentum with 16 outbound deals and one inbound transaction between July and August. So far this year, the sector saw 42 outbound and 12 inbound deals.

Chances are that despite a global banking shakeout, which has cast a shadow on large IT vendors, deals would continue to happen. Pankaj Karna, head of M&A business at Grant Thornton, said that large value deals in outbound segment could be expected as India is left relatively unscathed by the subprime fiasco.