Infosys will acquire Swiss-based SAP implementation firm Lodestone Holding for $349 million (about Rs 1,938 crore). This is expected to give the IT major a foothold in consulting practice, particularly in continental Europe.
This is the largest ever acquisition that India’s third largest software exporter has made. With this, Infosys gets access to Lodestone’s 200 clients in Germany and elsewhere in Europe in the IT and traditional consulting space.
$4-billion cash-pile
The IT major, sitting on a cash pile of $4 billion, funded the acquisition through internal accruals. Infosys will pay two-thirds of the money upfront and the rest after three years.
The deal, which is likely to be closed by October end, is part of Infosys’s 3.0 strategy to strengthen its consulting services business. This could help it improve margins than traditional IT outsourcing that is getting increasingly commoditised, according to Infosys CEO S. D. Shibulal.
The Infosys stock went up slightly to close the day at Rs 2,511 — up 0.6 per cent. Infosys’ consulting and system integration practice gets a boost with Lodestone adding 850 employees, including 750 experienced SAP consultants. “Post acquisition, the combined consulting practice of both the companies focusing on SAP would deliver revenues of $1 billion,” said Shibulal.
The acquisition will immediately start flowing into Infosys’ revenues, according to CFO V. Balakrishnan.
Accounting for 31 per cent of the company’s revenues, Infosys’ consulting and systems integration business, at the end of FY-12, had 30,000 consultants across 10 industry verticals.
The Lodestone acquisition will enhance Infosys’ global presence, particularly in continental Europe and emerging markets such as Latin America and the Asia-Pacific, said Shibulal.
Strategic base
In the past few quarters, Infosys has been underperforming its peers TCS and Cognizant, which have grabbed a greater share of the IT outsourcing market despite the slowdown.
“The Lodestone acquisition gives Infosys a profitable and strategic SAP customer base,” said Ray Wang, CEO & Principal Analyst, Constellation Research.