Mastek acquires US firm to get insurance edge
Mumbai-based Mastek, one of the nation's oldest software service exporters, has acquired Vector Insurance Services LLC (Vector), a US-based technology solutions provider and third party administrator that focuses on the North American life insurance industry, for $10 million. The buyout will help it compete with giants like Infosys.
Mastek’s wholly-owned US subsidiary MajescoMastek will hold 90 per cent equity in Vector, company officials said on Monday. MajescoMastek is a wholly owned subsidiary that provides outsourced services to insurance sector clients in the US.
At the end of fiscal 2006, Vector had revenues of $4.2 million. Mastek’s shares closed at Rs. 330, an almost 15 per cent rise over the previous close. After the acquisition, Vector will operate as VectorMastek. “This acquisition gives us a strong footprint in the US insurance market,” said Sudhakar Ram, CEO, Mastek. "With this acquisition, Mastek has got two large American insurance companies, which Vector counts as its clients."
“Vector comes with an attractive operating status and the acquisition is revenue and earnings accretive to Mastek,” said William McCarter, President of Mastek’s US operations. He added that this transaction is expected to noticeably strengthen the pipeline for Mastek in the insurance sector. “This would start impacting the revenues from the current quarter,” said a Mumbai-based analyst.
Mastek's Ram had recently told Hindustan Times that the company was looking at acquisitions in the insurance sector to compete against bigger players such as Tata Consultancy Services (TCS) and Infosys. The company, which currently derives almost 65 per cent of its revenues from Europe, is trying to make a stronger point in the US market amidst stiff competition from bigger players such as TCS, Infosys and Genpact.
Specializing in insurance industry software solutions and services, Mastek’s US operations grew by 40 per cent in the year 2006 and to sustain the growth momentum, the company had to make an acquisition in the US, said an analyst from a Mumbai-based brokerage house.