Setting its feet deeper in the Latin American market, IT service provider Mahindra Satyam on Friday announced the acquisition of Complex IT, a Brazil-based SAP player, for $23 million in an all-cash deal.
“We will be paying $6.5 million up front for the acquisition and then will study the market for the next 18 months, post which, the remaining amount will be invested,” said Manoj Bhat, senior vice-president and head – corporate planning and M&A, Tech Mahindra.
The deal is worth six times the operating profit of Complex IT and takes Satyam’s headcount in Brazil up to over 600 from 120 now.
The acquisition gives Mahindra Satyam a foothold in the fast growing SAP market in Brazil. “We will now be able to offer bundled services on the SAP platform,” said Bhat.
The SAP industry in Brazil is a $36 billion market growing at the rate of 20%. Of this, Complex IT, with its $45 million revenue, has a 5% market share.
“We are planning to take the revenues to $130 million in the next five years,” said Bhat.
Analysts said the deal is value accretive if it is driven by growth and margin improvements.
While it will help Mahindra Satyam tap the Brazilian market better, “It is a very small acquisition and will contribute only 1% to the company’s overall revenues once Tech Mahindra and Mahindra
Satyam are merged,” said Ankita Somani, IT analyst, Angel Broking.
In fact, the company has already embarked on the merging and restructuring process under
which it plans to have 30-40 CEOs to look after different geographies and verticals.
Jagdish Mitra, head - mobility business, Tech Mahindra, said the merged entity is expected to generate revenues of $2.7 billion in CY13, and $5 billion by 2015. It is expected to internally launch its new brand identity by March 15 and six weeks after that will publicly announce its new name.