Tuesday, October 04, 2005

Satyam Computer Services Limited announced the strategic acquisition of Citisoft

Satyam Computer Services Limited announced the strategic acquisition of Citisoft, a specialist business and systems consulting firm for the investment management community. The deal was for $23.2 million, with an additional performance-based payment of up to 15.5 million to be paid over three years.
In announcing the acquisition, Satyams founder and chairman B. Ramalinga Raju said the acquisition of Citisoft, founded in London with offices in New York and Boston, would help the Hyderabad-based IT solutions provider build a unique position and global footprint in the Financial Services sector.
Clearly, in the case to Satyam-Citisoft, location was only one factor. Anil Kumar, senior vice president and head of the Satyams financial services group noted that Citisoft has significant domain experience, strong risk management expertise, and has established itself with an impressive list of clients in the specialized investment management community.
When you combine their domain expertise with the technological breadth we bring to the table its really a compelling proposition, Kumar said.
Yet the acquisition highlights a pattern that has begun to form, in which offshore firms, once viewed as outsiders, are acquiring companies with more established local presences in the markets they serve.
This isnt the first offshore-onshore marriage in which the offshore firm was doing the courting. Back in December of 2003, Mumbai-based i-flex acquired SuperSolutions Corporation, a US-based specialized consumer lending software providers in an all-cash deal for $11.5 million. However, i-flex has a unique history, having gotten its start in 1985 as a division of Citicorp, which decided at the time that it needed a base of highly skilled technology workers in India to support and maintain smaller projects for overseas operations. Citigroup spun off the business in 1992 and currently owns about one third of it, according to analysts.
The list of companies acquired by Bangalore-based BPO firm Wipro in its first wave of acquisitions included Spectramind (aquired piece by piece, starting with a 24 percent stake in 2001 for $10 million), American Management Systems (also known as AMS, for more than $26 million in 2002), and NerveWire Inc. (for 18.7 million in 2003). NerveWire and AMS in particular gave Wipro the opportunity to seek high-end consulting assignments while bidding on large outsourcing deals, Indian technology industry writer Pankaj Mishra wrote in 2003. They also increased clients comfort factor with Wipro, he wrote. As for Spectramind, 10 percent of its revenue was already coming from Wipro clients as of as of 2003 and that number was expected that number to grow. Today, speculation abounds that the firm is on the verge of another acquisition spree, and chief executive Azim Premji confirmed in an interview with SiliconIndia in June that a number of acquisitions are in the pipeline.
In Satyam-Citisofts case, the two firms were introduced through mutual clients of Citisoft and Satyams Financial Services Group, the division into which Citisoft will now be included, and Bear Stearns Asset Management was a mutual client quoted in the release announcing the acquisition.
While on the surface these types of moves appear particularly strategic for the aquirer, Dan Houlihan, Citisofts managing director of US operations, said the deal held advantages for the acquired as well. Prior to the acquisition talks, Citisoft had identified outsourcing as one of the specific threats to its business.
Many investment management clients have outsourced key functions, and much of the work we do onsite could be done elsewhere, he said. Through the merger, he added, the two firms could provide very complementary services, pairing Citisofts expertise from its on-site consulting experience with Satyams technology and offshore capabilities.

The article sponsored by A-1 Technology Inc, dealing in software outsourcing and software development outsourcing.