M&As on the Rise in APAC ITO Sector
By CXOtoday Staff
Mumbai, Nov 20, 2008 1500 hrs IST

A latest study by Everest Research Institute has shown that ITO suppliers in the APAC region are increasingly looking at mergers and acquisitions to sustain their growth momentum. Out of the 114 major M&A deals completed by 34 leading ITO suppliers worldwide between January 2004 and September 2008 included in the Everest study, APAC contributed approximately 14% of total number of deals. Eight of the total 114 M&A deals occurred in India, with nine of the total 34 ITO suppliers acquiring were from India.

While half of the M&A deals occurred in North America, Everest analysts observed a fast growth of acquisitions in EMEA, demonstrating a renewed focus on Europe. In fact, the study has found that M&A activity has been steadily rising among ITO suppliers year-on-year ever since 2004. Among the ITO M&A deal target service lines, Application Development & Maintenance (ADM) and IT consulting emerged as the hot favorites with 37% and 31% of deals respectively.

Another perspective that emerged from the study is that the average deal size in Europe ($415million) and in APAC region ($325 million) is higher than that in North America ($221 million).

The study also indicates that the spurt of inorganic growth among ITO suppliers is not due to the economic slowdown only. Shiraz Ritwik, research director of Everest Research Institute said, We have observed six main themes that characterize M&A activities in ITO enhancement of offshore presence; expansion into newer geographies; acquiring industry-specific skills, especially domain-specific consulting skills; buying into existing book of business (i.e., existing client-base); plugging gaps in their service portfolio by acquiring specific IP or skill-set; or consolidating their offshore operations.

Of these, the biggest levers for a majority of M&A deals have been filling gaps in service portfolio (36%) and acquiring industry-specific skills (35%), he said.


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