BANGALORE: Mumbai-based software products and services provider Infrasoft Technologies has mandated three investment banks including Avendus Capital to look for acquisitions in the US in the range on $10-15 million. This comes on the heels of Infrasoft's acquisition of the financial services business of KPIT Cummins in October this year.
Infrasoft is amongst a host of small-sized companies that are making acquisitions despite global economic conditions looking uncertain. Srividya C G, partner, valuation services, in advisory firm Grant Thornton, said the IT sector has done the most number of M&A deals this year.
Companies say that technology services with evolved business models and pricing mechanisms are vital for customers even during difficult times. They have become partners as opposed to pure vendors to clients. Grant Thornton data shows that overall M&A deals in the first 10 months of this year amounted to $33.6 billion, a fall of over 21% from the year-ago period. The number of deals fell to 523 from 662. The corresponding figure for IT stood at $3.3 billion compared to $0.68 billion in the previous year. The number of deals fell marginally from 102 to 99. This includes some large-sized deals concluded by companies like Wipro, iGate and Genpact.
While acquisitions by larger technology companies have slowed down, smaller sized companies have kept up the momentum.
Investment bankers say that falling valuations are helping sustain the interest for acquisitions. Srividya said tech players have not been very successful in developing capabilities organically and are thus looking to make buys to fill these gaps.
Cloud technology for instance has been a focus of many acquisitions in recent times with companies like Aditi Technologies and Vembu Technologies making acquisitions in the space.
IBS Software, an IT solutions provider catering to travel, transportation and logistics industries, acquired Moveo Systems to drive its enterprise mobility offering. "With this, IBS can widen its service offerings and speed up innovative practices," said CEO of IBS, Rajiv Shah.
Hanuman Tripathi, group MD of Infrasoft, said that it is easier for smaller companies to make acquisitions. For large companies, managing scale is difficult. Also, it is an easier decision for a niche player to add specialized capabilities through acquisitions than for a larger generalized player. It is not only the pure technology players that are making acquisitions. Internet startup Flipkart and BPOs like EXL and Hinduja Global Solutions (HGS) have also bought companies over the last few months. HGS in August acquired Canada-based customer relationship management company Online Support (OLS) for $78 million.
"Despite the economic uncertainty, several clients are in discussion to grow existing relationships. We also have strategic plans to grow newly acquired businesses and verticals," said Partha Sarkar, global CEO of HGS. However analysts warn that there have been instances in the past of acquisitions going sour, especially during downturns. Subex is a reminder of how chasing growth has risks.