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Infosys acquires Lodestone in its biggest buyout
Probabaly keeping tough competition and consequent squeezing profits in the technology outsourcing sector in mind Infosys will acquire Swiss SAP implementation firm Lodestone for 330 million Swiss Francs (about Rs 1,932 crore).
The acquisition, the biggest by Infosys so far, is expected to strengthen the consulting and systems integration (C&SI) capabilities of the company and will increase revenues from its European operations. The combined consulting practice focusing on enterprise solution SAP is likely to deliver revenues of more than $1 billion.
The buyout will “firmly establish Infosys among the global leaders in SAP consulting,” Infosys CEO and Managing Director SD Shibulal said on Monday.
The all-cash deal is expected to be completed by October.
Speaking to reporters he said, “A key plank of our Infosys 3.0 strategy is to expand our C&SI. This acquisition fits perfectly into that strategy. Lodestone and Infosys share a culture of unwavering focus on nurturing and maintaining client trust.”
Infosys C&SI business has more than 30,000 consultants across 10 industry verticals and accounts for 31 per cent of the company’s revenue.
“The acquisition is in line with the company’s strategy of furthering the depth in the consulting business. The acquisition will enable Infosys to increase the depth of its expertise and also help it in penetrating existing clients more, apart from getting into new accounts. The acquisition is also expected to enhance Infosys’ presence,” said Dipen Shah, Head of Fundamental Research Kotak Securities while commenting on Infosys acquiring Swiss SAP Consultant Lodestone.
Shibulal said the deal will significantly enhance global presence of Infosys, particularly in continental Europe and emerging markets like Latin America and Asia Pacific.
Infosys was at the receiving end of criticism after missing its own revenue guidance for April-June quarter and lost its position as country’s second largest software to Cognizant even as rivals like TCS boosted their businesses with multiple buyouts.
Analysts have blamed unwillingness of Infosys-- which had $3.7 billion in cash at the end of June quarter-- to go in for buyouts as one of the main reasons for the slower growth.
“The acquisition of (Lodestone) will address some of the concerns relating to utilisation of excess cash. It is not likely to make any significant difference to the overall financials as the revenues of Lodestone are less than five per cent of Infosys’ projected FY13 revenues,” added Shah.
The acquisition may take Infosys closer to its goal of offering clients higher value services and consulting.
Infosys share rose over one per cent in intra-day trade, amid a flat broader market. It closed at Rs 2,511 a piece, 0.6 per cent higher than its previous close on the BSE.
The acquisition will also add more than 200 clientsacross industries, including manufacturing, automotive and life sciences, to the Infosys pool of over 700 clients.
It will add the head-count of Infosys by 850 employees, including 750 experienced SAP consultants.
Acquisition of Lodestone is a small step for Infosys and a great leap for the Indian IT industry as it integrates consulting and IT services, Infosys Chief Financial Officer V Balakrishnan said.
“We expect that this acquisition will help strengthen our system integration space and bring more profits because every one dollar earned through consulting, we expect to earn two to three dollars in overall business,” he added.
Headquartered in Zurich, Lodestone advises international companies on strategy and process optimisation, and provides business transformation solutions enabled by SAP’s enterprise solutions.
“We are eager to leverage the widely acknowledged global reach of Infosys and its leadership in the consulting and technology arena to deliver greater value to our clients. This will enhance the momentum that Lodestone is already witnessing in the marketplace,” Lodestone Chairman and CEO Ronald Hafnerv said.
Within hours of announcing Lodestone acquisition, Infosys said its BPO arm McCamish Systems has bought US-based Marsh to expand its presence in the group life insurance space.
“McCamish already has a strong presence in life insurance business. This acquisition will help us increase our presence in group life insurance business space,” Infosys BPO CEO and MD Swaminathan D told PTI.
Financial details of the transaction were not disclosed. Marsh BPO, based in Des Moines, Iowa has 87 employees and serves seven insurers and covers more than 600,000 insured lives.
Probabaly keeping tough competition and consequent squeezing profits in the technology outsourcing sector in mind Infosys will acquire Swiss SAP implementation firm Lodestone for 330 million Swiss Francs (about Rs 1,932 crore).
The acquisition, the biggest by Infosys so far, is expected to strengthen the consulting and systems integration (C&SI) capabilities of the company and will increase revenues from its European operations. The combined consulting practice focusing on enterprise solution SAP is likely to deliver revenues of more than $1 billion.
The buyout will “firmly establish Infosys among the global leaders in SAP consulting,” Infosys CEO and Managing Director SD Shibulal said on Monday.
The all-cash deal is expected to be completed by October.
Speaking to reporters he said, “A key plank of our Infosys 3.0 strategy is to expand our C&SI. This acquisition fits perfectly into that strategy. Lodestone and Infosys share a culture of unwavering focus on nurturing and maintaining client trust.”
Infosys C&SI business has more than 30,000 consultants across 10 industry verticals and accounts for 31 per cent of the company’s revenue.
“The acquisition is in line with the company’s strategy of furthering the depth in the consulting business. The acquisition will enable Infosys to increase the depth of its expertise and also help it in penetrating existing clients more, apart from getting into new accounts. The acquisition is also expected to enhance Infosys’ presence,” said Dipen Shah, Head of Fundamental Research Kotak Securities while commenting on Infosys acquiring Swiss SAP Consultant Lodestone.
Shibulal said the deal will significantly enhance global presence of Infosys, particularly in continental Europe and emerging markets like Latin America and Asia Pacific.
Infosys was at the receiving end of criticism after missing its own revenue guidance for April-June quarter and lost its position as country’s second largest software to Cognizant even as rivals like TCS boosted their businesses with multiple buyouts.
Analysts have blamed unwillingness of Infosys-- which had $3.7 billion in cash at the end of June quarter-- to go in for buyouts as one of the main reasons for the slower growth.
“The acquisition of (Lodestone) will address some of the concerns relating to utilisation of excess cash. It is not likely to make any significant difference to the overall financials as the revenues of Lodestone are less than five per cent of Infosys’ projected FY13 revenues,” added Shah.
The acquisition may take Infosys closer to its goal of offering clients higher value services and consulting.
Infosys share rose over one per cent in intra-day trade, amid a flat broader market. It closed at Rs 2,511 a piece, 0.6 per cent higher than its previous close on the BSE.
The acquisition will also add more than 200 clientsacross industries, including manufacturing, automotive and life sciences, to the Infosys pool of over 700 clients.
It will add the head-count of Infosys by 850 employees, including 750 experienced SAP consultants.
Acquisition of Lodestone is a small step for Infosys and a great leap for the Indian IT industry as it integrates consulting and IT services, Infosys Chief Financial Officer V Balakrishnan said.
“We expect that this acquisition will help strengthen our system integration space and bring more profits because every one dollar earned through consulting, we expect to earn two to three dollars in overall business,” he added.
Headquartered in Zurich, Lodestone advises international companies on strategy and process optimisation, and provides business transformation solutions enabled by SAP’s enterprise solutions.
“We are eager to leverage the widely acknowledged global reach of Infosys and its leadership in the consulting and technology arena to deliver greater value to our clients. This will enhance the momentum that Lodestone is already witnessing in the marketplace,” Lodestone Chairman and CEO Ronald Hafnerv said.
Within hours of announcing Lodestone acquisition, Infosys said its BPO arm McCamish Systems has bought US-based Marsh to expand its presence in the group life insurance space.
“McCamish already has a strong presence in life insurance business. This acquisition will help us increase our presence in group life insurance business space,” Infosys BPO CEO and MD Swaminathan D told PTI.
Financial details of the transaction were not disclosed. Marsh BPO, based in Des Moines, Iowa has 87 employees and serves seven insurers and covers more than 600,000 insured lives.
