Information systems Considering acquisitions: Information systemsIndia’s second-largest IT services provider, Infosys is exploring more acquisitions after two major deals this year. The company’s CEO Salil Parekh has said that more acquisitions are possible, similar to its recent buyout in the technology sector. In an interview with PTI, Parekh shared that Infosys is eyeing acquisitions in areas such as data analytics and software as a service (SAAS), and is also looking at expanding its presence in certain European and US markets.
Major deals are likely
Asked if future acquisitions could match the scale of the tech deal, which was valued at €450m, “Absolutely, I think that would be the size we would look at in terms of scale, and given our structure we could do some of those,” he said earlier this year. Information systems It finalised a deal to acquire InSemi Technology Services, an Indian semiconductor design company, for up to Rs 280 crore, including additional earn-outs and management bonuses. This was followed by a larger acquisition in April, when Infosys Germany acquired in-tech Holding, a leading German provider of engineering R&D services, for up to €450 million (roughly Rs 4,045 crore). Parekh said the company’s recent acquisitions in engineering services have boosted its capabilities. “…we already have very good businesses in engineering services within Infosys and then we did those two acquisitions, both in engineering services, one on the semiconductor side and one on the automotive side… very strong businesses, and we feel pretty good about expanding that footprint,” he added.
Expanding global presence
Parekh said the company is evaluating multiple potential targets, with a focus on expanding into new geographies.
“We have a good balance sheet and good cash generation and we are now quite comfortable with integrating acquisitions in different areas. We have done engineering services, we will look at other areas… for example, data analytics… maybe we will look at SAAS (software as a service) areas, and maybe in other geographies in Europe, maybe in the US as well,” Parekh added. However, Parekh highlighted that several factors, including strategic fit, financial cost, cultural compatibility and integration challenges, will influence these decisions.
“We are still looking and we have things that are normally in the pipeline, but that takes time… there are a lot of discussions about strategic fit, financial cost and cultural fit in the company and then how we will integrate them. A lot of those discussions are ongoing and we will see what comes out,” he explained.
Evaluation process underway
Asked about the timeline for closing additional deals this fiscal, Parekh acknowledged uncertainty. “It’s difficult to say… we are evaluating several (of them). But to get a fit on strategic parameters, financial parameters, culture, integration – all may not work out. But these two (InSemi and In-Tech) happened relatively quickly… before that, for a few quarters we had not done anything. It’s not a predictable thing, but the evaluation is on,” he said. According to the Grant Thornton Bharat Dealtracker Q2 2024 report, Indian dealmaking saw a total of 501 deals valued at $21.4 billion.
The second quarter of 2024 saw the highest quarterly deal volumes since the second quarter of 2022, although deal values declined due to fewer large-scale M&As. The report further highlighted that M&A activity during the second quarter saw 132 deals worth $6.2 billion, a slight increase in volume but a significant 50 percent drop in value compared to previous quarters.
Domestic deals drove growth with volumes up 29 percent and values up 2.5 times compared to Q1 2024.
In contrast, cross-border transactions experienced a decline, with volumes down 24 percent and values falling 85 percent from the previous quarter.
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