Indian IT majors scout for acquisitions in economic crisis-hit Europe

Perhaps economic downturns are the best time to go for shopping. Taking a cue from this perception, almost all major Indian IT firms, including Tata Consultancy Services (TCS), Infosys Technologies, Wipro, and HCL Technologies are likely to advance their acquisition strategies in Europe since valuations are becoming all the more alluring in this economically hit region.

Although many of these firms have already made a number of acquisitions in the recent months, they are still keen to augment their brand, particularly keeping in view the fact that they need to diminish the risks of focusing on the export business dominated by the United States. This, they are aware, can be achieved by diversifying their business to new areas and establishing footprint in new markets.

A news website reports that the proposed acquisition by the Indian IT majors in Europe could vary from small sized firms worth approximately $10 million to relatively larger ones of the size of $500 million.

The report quotes HCL Technologies CEO Vineet Nayar as saying that this is certainly the most suitable time for planning new acquisitions in Europe. Substantiating his view, Nayar said that right now the valuations are quite low in the continent plagued by a currency crisis. The HCL Technologies chief executive further said that his firm is scouting for acquiring relatively smaller firms in continental Europe.

Echoing the views expressed by Nayar, the COO of the advisory firm KPMG’s Indian unit Kumar Paralaka said that the current economic scenario in Europe is likely to increase mergers and acquisitions (M&A) in the continent during the current year. Quoting statistics, Parakala said the while the outbound M&A activity had nearly decreased by 70 to 80 per cent during the 2009 fiscal year, the general market sentiment has begun to perk up once again.

Infosys Technologies CEO S. Gopalakrishnan too confirmed that India’s second largest IT firm too was looking for acquiring relatively smaller European firms in the range of $300-$500 million. He further said that Infosys was particularly eager to acquire firms engaged in BPO, consultancy and enterprise planning business.

India’s largest IT firm Tata Consultancy Services (TCS) and Wipro, the third largest IT firm in the country, too have corroborated reports that they were advancing their acquisitions plans in Europe. However, these two IT majors refused to divulge further information at the moment. Nevertheless, it has been learnt that while TCS is keen on acquiring small or mid-sized firms, Wipro chief strategy officer K. R. Lakshminarayana revealed that they had a good number of opportunities in the pipeline.