Software testing companies, remote infrastructure management, SAP and Oracle integrators and IT consultancies are at the top of the shopping list for Indian companies looking to make acquisitions in the UK, according to Clearwater Corporate Finance.
A Clearwater team visited IT companies in Mumbai and Bangalore to discuss in detail their acquisition strategies. They met companies including Infosys, Wipro, Hexaware, Mindtree, Patni Computers, Cranes Software, Firstsource, Allied Digital, Sasken and Sonata Software.
Emma Leathley, technology analyst with Clearwater, said: “We were impressed by how very focused the Indian businesses were in their acquisition strategies. Rather than being too opportunistic, most are quite prescriptive about what they are looking for in terms of exact activities, size and geography.
“There is more of a focus on finding acquisition targets in the UK and continental Europe than in the US where many businesses are already over-exposed, the Nordics and Eastern Europe.
Because of the financial meltdown, during our visit there was a degree of caution but most businesses agreed that this was likely to be short-term reaction.”
Many of the businesses are strong in the banking, financial services and insurance, retail and manufacturing sectors but are also interested in penetrating other sectors such as travel, telecoms and healthcare by making acquisitions.
Emma adds: “Most businesses want acquisition targets with at least £10 million of turnover and are not interested in turnaround situations. They are looking for businesses to which they can add strategic value and which have strong management teams they can incentivise.
“Indian companies will of course look to offshore some element of a business to enhance margins. However contrary to the general perception in the West, they are not looking to buy a company and replace all of the staff with offshore Indian employees. They are aware that this ‘just doesn’t work’ in IT services.”
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