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IT services companies are acquiring ER&D (engineering and research and development) companies to boost their revenues. In the last two months of the financial year, about 11 such transactions took place globally, including one in Infosys.
The trend of acquiring ER&D companies comes at a time when IT company revenue growth is slowing down – India’s technology industry revenue growth is expected to fall by more than half to 3.8% in fiscal 2024. In this case, the ER&D field seemed like a perfect area to use to shore up revenue.
Last month, Infosys
ChrysCapital-backed company Xoriant acquires MapleLabs, a specialty product engineering firm serving Fortune 500 clients in the high-tech industry
Banerjee’s former organization HCLTech acquired 100% of German automotive engineering services provider ASAP Group last year to strengthen its capabilities in areas such as autonomous driving, electric vehicles and connectivity. HCLTech acquired the entire stake in cash, valuing the company at approximately $279.72 million (€251.1 million). Analysts expect the ASAP acquisition to help the IT giant post strong performance in Q4FY24.
Similarly, in September last year, Capgemini had about 180,000 employees in India
Parekh Jain, founder of Pareekh Consulting, said: “Of the $1.8 trillion in annual ER&D spending, only 5%, or $90 billion, is outsourced. In the next three years, this number will grow to about $300 billion. M&A for IT Services The company provides three Cs – acquiring customers, acquiring industry and service capabilities, and acquiring geographical capabilities.”
M&A is not limited to Indian IT companies. Jain said that about 70 M&A transactions occurred in the global IT engineering services field in 2023, including 9 M&A transactions by global IT giant Accenture.
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