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Atos to Acquire Syntel for $3.4B

martinwolf Transaction Analysis
Financial Information*
  • Enterprise Value                                        ~$3.40B
  • EV/LTM Revenue                                          3.60x
  • EV/LTM EBITDA                                          13.10x
Transaction Facts
  • French IT services company Atos (EPA: ATO) announced yesterday its plans to acquire Michigan-based IT services provider Syntel (Nasdaq: SYNT) for $41 a share in cash for each of Syntel’s roughly 83.6M outstanding shares — valuing Syntel at a total of $3.57B, including assumed net debt.
  • The purchase price represents a premium of 4.78 percent to Syntel’s closing price of $39.13 on Friday.
  • The transaction is expected to close by the end of the year.
A Mega Deal in the Solution Provider Space
  • Emerging Technologies: After its bid to take over Gemalto was thwarted last December by aerospace and defense group Thales, Altos has been quick to secure a new deal. Through this acquisition, the French firm will acquire Syntel’s suite of digital and proprietary solutions, including cloud, social media, mobile, analytics, Internet of Things and automation. Furthermore, the company’s diversified portfolio goes hand in hand with its expanding North American footprint — Syntel caters for roughly 22,500 employees, and expects to report revenue of $249.7M on Thursday.
  • Changing Strategy: Through cross-selling in the European and North American markets, Atos expects synergies to reach $250M by the end of 2021 with a $50M operating margin. By selling Syntel’s digital services and leveraging Atos’ own infrastructure capabilities, the combined company could capture large end-to-end digital transformation projects down the line.
  • Organic Growth: While Atos’ North American growth trajectory has been stalling, its acquisition may help strengthen its business in North America, particularly in its banking, finance and insurance activities. Things are looking up — Worldline, the company’s payments division, reported half-yearly organic revenue growth of 5.8 percent today.
  • Successful Past: This acquisition comes less than four years after Atos purchased Xerox’s IT outsourcing division for $1.05B. The addition of the 9,800-employee business nearly tripled the size of Atos’ operations in the United States, as Atos was able to become a primary IT services provider for Xerox in addition to taking on its IT outsourcing customers.
  • Extreme Customer Concentration: American Express, State Street Bank and FedEx were Syntel’s three largest customers last year, accounting for 45 percent of the company’s annual revenue (its 10 biggest customers generated 69 percent of its total revenue last year). This level of customer concentration is both an opportunity and risk factor for Atos, as the company seeks to expand in the US market.
For more information about this transaction, click here to read the press release.
 
*Financial information from the press release and FactSet.
martinwolf was not the advisor in this transaction.
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