Infosys close to $500-750 million US buyout

Infosys Technologies, India’s second-biggest information technology firm, is in advanced talks to acquire a US-based information technology firm, two people familiar with the developments said.

While the company could not be identified, the deal size is said to be in the range of $500-750 million, one person said.

Top officials of Infosys are believed to be in the US currently, supervising the due-diligence process.

However, when contacted, an Infosys spokesperson said, “We do not comment on rumours.”

If true, this could the Bangalore-based company’s attempt to get back on growth track after lagging rivals, amid gathering criticism of its distinct lack of deal-making savvy.

That talk has its genesis in the strategies of rivals such as Tata Consultancy Services and HCL Technologies, which have made acquisitions to pull ahead of competition, while Infosys was either outbid or chose to watch from the sidelines.

‘Conservative’ and ‘shy’ are two words often used to judge Infosys’s attitude towards buyouts, especially the bulge-bracket ones. That’s despite the company sitting on cash and equivalents of Rs16,916 crore as of June 30.

In December 2008, HCL outbid Infosys to buy the UK-based Axon, paying around $680 million. The British enterprise software consulting and implementation firm has been instrumental in HCL’s industry topping-growth rates after the global economic meltdown of 2008-09.

Analysts who had initially questioned the transaction are now applauding it.

Infosys was on the verge of acquiring Axon for £407 million but a week after Infosys made its intent public, HCL made a counter-bid at £441million to win over Axon’s board.

Around the same time, TCS bought the captive unit of global banking giant Citigroup for nearly $500 million. The transaction helped TCS get more than its fair share of the technology spend by US financial services industry as it shook off the slowdown blues.

Recently, Infosys marked a critical milestone when co-founder NR Narayana Murthy retired.

Analysts had hoped that fresh blood from non-founders may bring in some dynamism and aggression in the south Indian firm’s policy around mergers and acquisitions.

As another economic recession looms around the US and European horizon, acquiring and integrating a large firm present its own set of challenges for sure but the hope is it might be rewarding in the long term.