New Delhi June 18 The IT and BPO sector has notched $860 million in merger and acquisition transactions during the first five months of 2007. However, the sector ended-up accounting for less than two per cent of the country's overall M&A pie, which was sprinkled with multi-billion dollar deals during this period.
The cross border acquisitions surpassed domestic deals, both in terms of volume as well as value. In all, the cross border deals — those involving Indian IT/BPO companies acquiring overseas firms or vice versa — touched $661 million during January-May for 36 deals.
"While the deals volume in IT/BPO space is large, the average deal size remains relatively small at $15.3 million. Hence, the high-tech space accounted for less than 2 per cent of the overall merger and acquisition pie ($45 billion)," Mr Harish H.V., Partner-Corporate Advisory Services and Head-South India, Grant Thornton, told Business Line.
According to the data by Grant Thornton, there were 26 outbound deals, which took the overall deal value in the space to $598.30 million, while 10 inbound deals accounted for $62.7 million. On the other hand, the domestic market saw 28 deals grossing about $198 million, with the average size of deals pegged at $11.60 million. "While the number of deals will continue to rise in the remainder of the year, we do not expect a substantial growth in the value of M&A transactions in the IT and BPO sector. This is in contrast to the overall M&A space, which is witnessing multi-billion dollar deals such as Tata Steel acquiring Corus, and Birla group acquisition of Novelis," he said.
During January to May, the IT & BPO sector witnessed 64 M&A deals. Earlier this year, Pune-based business processing outsourcing company HOV Services (HOVS) announced the acquisition of Lason Inc for $148 million.
Subex Azure also announced buyout of Syndesis, a developer of telecommunications operations support software, in a $164.5-million all-cash deal — marking one of the biggest acquisition of an overseas company by an Indian technology vendor.
The year also saw Essar Global acquiring Global Vantedge, a BPO company owned by Chrys Capital, for $23 million. In another deal, Tata Consultancy Services increased its stake in the joint venture IT services company, TCS do Brasil, from 51 per cent to 100 per cent.
TCS acquired Grupo TBA's 49 per cent stake for a consideration of $33.4 million. Other takeovers included Citigroup-owned broadband service provider YOU Telecom acquisition of Ahmedabad-based digital Internet service provider IceNet, last month.