Infosys today announced acquisition in consulting space of Lodestone Holding AG for an EV of CHF330mn.Acquisition is in line with Infosys guidance of expanding its expertise in consulting space. While the immediate financial impact is likely to be limited, we believe the deal is structurally positive for Infosys.
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Key advantages for Infosys
Adding momentum to Infosys 3.0 journey with increased presence in business transformation consulting services resulting in higher quality growth for Infosys
Increases Infosys’ presence in CSI space. Infosys will have over $ 1 bn revenues annually from SAP led offerings. The 31,000 CSI practice of Infosys will have 10,000 SAP consultants
Solidifies Infosys’ footprint in Europe including near shore centers like Poland and Romania. Enhances Infosys’ footprint in newer markets like Brazil, China and Singapore
Very minimal client overlap
Financial and business profile of Lodestone
Global consulting firm headquartered in Switzerland; advises clients on strategy and process optimization and provides business transformation solutions enabled by SAP
FY 11 revenues of CHF 207 mn; over 850 employees including 750 consultants 18% revenue growth from FY 09-1183% revenues from Europe (50% of total revenues from Switzerland, 23% of total revenues from Germany); 12% from APAC28% revenues from Life sciences, 17% from industrial manufacturing, 16% from auto, 14% from consumer goods
Transaction details
Definitive agreement to acquire Lodestone. Approved by boards of both companies; transaction is subject to anti-trust clearance expected to be received in October
All cash transaction - Enterprise value of CHF 330 mn ($ 345 mn). 2/3 of consideration to be paid up-front with the other 1/3 to be paid after 3 years subject to certain conditions
To be non-GAAP EPS accretive after 18 months. Revenue synergies include cross-selling
Lodestone’s capabilities to Infosys clients and Infosys multi-service capabilities to 200 Lodestone clients. Cost synergies include optimizing multiple locations and common S&M costs
Integration
To operate as a subsidiary of Infosys named ‘Infosys Lodestone’ in Europe BG will be the Chairman and Ronald Hafner (present CEO of Lodestone) will continue as CEO of the subsidiary. Board of the company will include BG, Bala, Steve Pratt and Ronald Hafner
Infosys’ present MCS presence in Europe will be merged into the subsidiary. Lodestone’s present operations in Americas will be folded into Infosys
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