Capgemini eyeing Igate?

The fastest way to expand the existing business is by acquiring another company. And it appears that Europe's biggest IT services company Capgemini is likely to acquire NASDAQ-listed Igate, which was founded by Sunil Wadhwani and Ashok Trivedi. This was revealed by multiple sources in a Times of India (TOI) report.

According to the news daily, if the deal gets striked, it will be one of the biggest M&As in the IT services arena.

The TOI futher reported that in 2014, Igate had $1.27 billion as revenue. And now, its market capitalization stands at $3.6 billion.

The speculation about Igate being sold started soon after private equity giant Apax Partners, which financed much of Igate's $1.2-billion acquisition of Patni Computer in 2011, converted its debt into equity four months ago to become Igate's largest shareholder in the company.

Currently, Apax owns 29% stake in Igate, while Igate founders together hold 25% of the shares. According to the TOI report, Capgemini is looking at acquiring the 54% stake held by the promoters and Apax initially. However, it may later take Igate private by buying out the shares of other shareholders, sources told TOI.

Capgemini told TOI, "We do not comment on market rumours or speculation." Igate had not responded to queries at the time of going to print. There had been talk of French IT company Atos and BPO major Genpact looking at acquiring Igate, but Capgemini is said to have nearly sealed the deal.

Peter Bendor Samuel, CEO of Everest Group, said Igate would make an excellent acquisition for Capgemini. "They are the right size to absorb, not too small so it does not move the dial, but not so big that they will struggle. Igate will be accretive to margins. Capgemini has a large net operating loss in the US from their failed acquisition of EY's consulting practice, and the large Igate US presence will allow them to use it," he said.
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