Capegemini buys Igate for $4bn

Being considered as one of the biggest merger and acquisition deal in the global IT sector, Capegemini, the French IT major is acquiring Igate for $4bn. After this deal, Igate will become a subsidiary of Capegemini North America. This also sends strong signals for consolidation in outsourcing industry.

Igate, was founded by two Indian Americans, Sunil Wadhwani and Ashok Trivedi, in 1988 initially by the name of Mastech. But then later in 2000, during the dotcom boom, its name was changed to Igate along with making changes in its model. It was in the news in 2011 for acquiring Mumbai based Patni Computers and then again in 2013 for having fired its high profile CEO Phaneesh Murthy for having a secret relationship with a subordinate.

The CEO of Capegemini Paul Hermelin, called the deal ‘financially compelling’, as the firm was looking at an US acquisition and this deal with Igate perfectly fits their strategic plan. Capegemini gets 70 percent of its revenue fom Europe unlike other IT majors and was therefore aiming to expand its presence in the North America. Thus, this deal will help the firm achieve that as North America is Igate’s largest market.

Another benefit that Capegemini would be able to enjoy is that it would be able to have a greater reach in India, expected to be 1 lakh people by year end, because of Igate’s major employee base of 33,000 in India.  This change would put the firm at par with its other competitors like Accenture and IBM.

This transaction will be financed through a combination of cash and a limited equity portion. And as per reports, it was Bank of America Merrill Lynch which advised Igate to enter the deal.

This synergy of two great IT majors looks quite promising. The world awaits to see their performance together! Let’s wish them luck! 😀

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