Tech Mahindra has acquired Hutchison Global Services (HGS) for $87.1 million (about Rs 482 crore), a move that will help the company expand its IT and BPO businesses.
Tech Mahindra, a subsidiary of vehicle manufacturer Mahindra & Mahindra, acquired the BPO company by paying upfront. As part of the deal, HGS’ clients also committed business worth $845 million over a five-year period.
“The acquisition will provide considerable enhancement of Tech Mahindra’s expertise in customer management space and will thus be a key component of its strategic plans going forward,” its Executive Vice-Chairman Vineet Nayyar said.
In addition, the acquisition will enable Tech Mahindra to extend services to other Hutchison group companies and also to other customers and verticals, Nayyar added.
HGS has operations in Mumbai and Pune and provides customer lifecycle operations to clients in the UK, Ireland and Australia. It has an associate base of more than 11,500 employees.
“The deal complements the business we do, the geographies we are present in …,” Tech Mahindra President (Corporate Affairs and Business Service Group) Sujit Baksi said.
“Win-win” deal
“This deal is a win-win situation for both the companies. The only shift has been from in-house to outsourced operations. Tech Mahindra will get a business benefit, revenue benefit and a broader relationship will be established,” according to Jatin Bery, Executive Director at Kotak Investment Banking.
Kotak Investment Banking was the financial advisor to Tech Mahindra, while HGS was advised by Goldman Sachs.
Funding plan
The acquisition would be funded through a combination of internal accruals and borrowings, Nayyar said, adding, “We generate pennies once in a while, and we used them.”
“The benefits of this acquisition will start reflecting from September 4 onwards,” Nayyar, said, adding that there would not be any headcount reduction or change in HGS’ top management.
Shares in Tech Mahindra closed up 1.28 per cent at Rs 820.90 on a flat Mumbai market (BSE).