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IT giants fish for buys in troubled Europe

business Updated: Aug 10, 2010 02:26 IST
Vivek Sinha

When there is an economic downturn, it is the right time to go shopping.

Information technology giants such as HCL Technologies, Infosys, Wipro and Tata Consultancy Services are expected to fast-track their acquisition plans in Europe as valuations get attractive in the crisis-hit continent.

With some buyouts already behind, companies are still eager to increase their footprint, especially in the light of realisation that the US-dominated export business needs to be "de-risked" by diversification.

These acquisitions could range from small ones valued at around $10 million (Rs 46 crore) to much bigger ones that could go as high as $500 million (Rs 2,300 crore).

"Yes, This is the right time for acquisitions in Europe. The valuations are low and we are looking at smaller acquisitions in continental Europe," Vineet Nayar, CEO of HCL Technologies told Hindustan Times.

Kumar Parakala, Chief Operating Officer (COO) of the Indian unit of corporate advisory firm KPMG said there was a likelihood of increased M&A (mergers and acquisitions) activity in Europe this year.

"Outbound acquisition activity was almost reduced by 70-80 percent in Fiscal Year 2009. General sentiment in the market has started to improve again," he said.

S. Gopalakrishnan, CEO of Infosys had said he was eyeing smaller firms in the $300 -$500 million range.

"The firms of our interest would be in the BPO (business process outsourcing), enterprise planning, and in Consultancy," he said.

TCS and Wipro have also confirmed acquisition plans in Europe though details are not forthcoming. While TCS speaks of small or mid-sized buyouts, K.R. Lakshminarayana, chief strategy officer at Wipro said his firm had a "healthy pipeline" of opportunities.

IT majors expect almost a third of their revenues to come from Europe in the long term. IT spending in the EMEA (Europe, Mid-East, Africa) region is almost similar to that in the US though historically, Indian firms have not been active enough there.