decor decor
"Business is a combination of war and sport."

-Andre Maurois

Capgemini Announces Acquisition of IGATE

martinwolf Transaction Analysis

Financial Information

  • Transaction Size: $4.6 Billion
  • EV/LTM Revenue: 3.5x
  • EV/LTM EBITDA: 17.2x

Transaction Facts

  • French IT services company Capgemeni (CAP.PA) announced today that it was acquiring rival U.S.-based IT services firm IGATE Corp. (Nasdaq:IGTE) for $48 per share, a 5 percent premium over the company’s Friday closing price.
  • According to the press release, the combined company will have revenue of 12.5 billion EUR for 2015 and an employee headcount of approximately 190,000.
  • Capgemeni will fund the acquisition through a combination its own cash, a capital raise and debt. Its share price increased almost 8 percent Monday on news of the acquisition.
  • IGATE’s share price has been steadily growing since its last earnings report on Jan. 20. After today’s close, the company is up almost 35 percent since markets opened on Jan. 21.

Buying Into a Large Market, With Cultural Concerns Looming

  • Cementing An Already Strong Presence: Capgemini has called North America the most innovative technology and services market in the world. It is already Capgemini’s strongest region, where in the first quarter it experienced 34 percent revenue growth. With 80 percent of IGATE’s business coming from North America, this acquisition will see the region represent 30 percent of the combined group’s 2015 revenue, making it Capgemini’s largest market.
  • Shortcut to Success: Acquiring IGATE provides a financial shot in the arm beyond its size alone. Capgemini expects the acquisition to grow its EPS by at least 12 percent next year and raise its operating margin (previously expected to be 9.5-9.8 percent) above 10 percent.
  • Commoditization Threatens Space: On Friday, Infosys, another major player in the IT services industry, announced its Q4 earnings. The company, struggling with commoditization in its traditional services, reported revenue that was among its weakest in three years.
  • Potential Cultural Issues Present Concerns: While this acquisition presents clear opportunities for Capgemini, we are concerned about the potential for cultural clashes. As a “national champion,” Capgemini is subject to greater political interference that may compromise IGATE’s effectiveness (see the fates of Alcatel-Lucent, Renault/Nissan and Danone for examples). If it were acquired by a British or American company, we would be more optimistic-but for now, we’ll be watching closely to see what happens.

For more information on this transaction, click here.

martinwolf was not the advisor in this transaction.
previous post Back to Articles next post

16 Jul 2021

Platinum Equity Acquires Ingram Micro

*Financial Information ($USD) Enterprise Value:         $7.2 Billion EV/FY20 Revenue:      0.15x Transaction Details Platinum Equity announced that it has completed the acquisition of Ingram Micro Inc. from HNA Group. Ingram Micro’s total enterprise value in the transaction was $7.2 billion, including $5.9 billion in equity value Ingram will retain CEO Alain Monié and...

13 May 2021

NWN Corp. Acquires Carousel Industries

Financial Information ($USD) Not Disclosed Transaction Details NWN Corporation, a leading Cloud Communications Service Provider (CCSP), announced yesterday that it will acquire fellow solutions provider Carousel Industries. Financial terms of the deal were not disclosed. New State Capital Partners, majority stakeholder of NWN since 2015, is backing the transaction which will form a combined company...

13 May 2021

Softchoice Files for IPO

Announcement Details Softchoice Corporation, a leading technology solutions provider in North America, announced yesterday that it has filed a preliminary prospectus for an initial public offering. Softchoice’s common shares will be traded on the Toronto Stock Exchange, although the number of shares and price have not yet been disclosed. Before Toronto-based Softchoice was taken private in...