New Delhi: Europe seems to have become the favourite destination for acquisition by Indian IT companies and Tatas' recent purchase of French firm Alti could be the prelude to a long-awaited European acquisition spree, experts believe.
Notwithstanding Europe's stringent labour laws and high operating costs, a number of Indian software firms have made acquisitions in the European Union off late.
Besides the Tata-Alti deal this month, Geometric acquired 3Cap Technologies for 11 million euros in January.
Last year, Infosys acquired Swiss consulting company Lodestone for USD 350 million, while Cognizant Technology Solutions Corp acquired six small IT services companies that were part of Germany's C1 Group for an undisclosed sum.
Commenting on the trend, deal tracking firm Mergermarket Global Head of Technology Pamela Barbaglia said: "EU targets would help Indian companies enhance their R&D, sales and after sales capabilities. In addition, top tier companies would benefit from a deeper EU presence, which would reduce their dependency on the US."
Barbaglia further said that "Tata's recent purchase of France-based Alti on April 8 could be the prelude to a long- awaited European acquisition spree."
According to leading assurance, tax and advisory firm Grant Thornton India Partner, Transaction Advisory Services Raja Lahiri, "for Indian IT players, US has typically been the largest IT market. However, given the overall growth pressures in the US, Indian IT players are focusing to grow non-US business, specifically Europe business".
Explaining the rationale behind, consulting and research firm Knowledgefaber CEO Amit Goel said, "Valuations are looking better due to weak economic and business climate. Relatively less cost of acquisition means lot of targets are looking attractive now. So Indian companies are chasing those."
Moreover, the deal value of Indian transactions in the EU is gradually increasing. Earlier Indian players typically shopped for EU assets worth around 10-15 million pounds. But Infosys bought Lodestone Management Consultants last year for a whopping 218 million pound.
Knowledgefaber's Goel further said: "Europe is really attractive from a market standpoint as Europe accounts for more than one quarter of the World ICT Market, the US accounts for 41.9 percent of the world market, Europe for 31.6 percent and Japan for 12.2 percent.
Goel further added that Indian companies are also trying to hedge their risks by developing markets other than US. Europe is considered as a next good region for sales as the markets are opening to outsourcing.
First Published: Sunday, April 14, 2013, 11:19