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Cognizant Technology on the hunt for buyouts in Europe

By Sanjay K Pillai in Chennai
August 26, 2003 09:31 IST
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The United States-based Cognizant Technology Solutions, after having spent $17 million in acquiring companies last year, is now scouting for more buyouts.

The New Jersey-based company has a war chest of about $140 million and, according to top sources, is now inclined to make acquisitions in three-four niche areas which will give it a global footprint.

On the cards are acquisitions in Europe, and of companies that are involved in package implementation in areas such as SAP and PeopleSoft.

"We are looking at acquisitions primarily to fill in gaps in our solution sets, move up the value chain and expand our geographic presence," a top Cognizant source said.

"Currently, we are seeing a strong demand for package implementation in areas such as SAP and PeopleSoft and we are looking at acquisitions in those areas. As we are finally seeing large deals springing up in Europe, we are looking at acquisitions there," the source said.

But at the same time the US-based company, which has 11 development centres spread across Chennai, Kolkata, Pune, Bangalore, and Hyderabad, is looking at buyouts in areas where it has stolen a march over traditional Indian software services rivals.

"We are also looking to a limited extent to build upon our vertical domain knowledge through acquisitions, even though it is an area of strength for us. We are currently targeting two of our high-growth verticals-financial services and healthcare," the source said.

In the last one year, Cognizant has made three acquisitions at an approximate investment of $17 million.

It acquired the assets of United Healthcare in Limerick, Ireland for about $3 million; the American Express account from Silverline Technologies for about $10 million; and in April this year, ACES, a specialist CRM solutions company, for about $4 million.

"We acquired ACES to fill in product line gaps in the CRM space, American Express to strengthen our financial services practice, and UnitedHealthcare's Ireland assets to establish a global footprint and a near-shore capability for our European operations," the source added.

While acquiring the American Express account, Cognizant indicated an annualised revenue run rate of $15 million, and while acquiring ACES, it projected to realise revenues of $7 million in the remaining three quarters this calendar year.

Leading industry analysts have felt that these acquisitions are good acquisitions from a financial standpoint as Cognizant paid just 30 to 50 per cent of the annual realisable revenue from these companies as the acquisition cost.

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Sanjay K Pillai in Chennai

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