Mindtree scouts for acquisition in US, Europe

Company eyes $30-$50 million infra management, package application firm

Mid-sized IT firm Mindtree is scouting for acquisition in the US and Europe, and may buy a $30 million-$50 million firm to strengthen its offerings in infrastructure management and package application solutions, Co-Founder, CEO and MD Krishnakumar Natarajan told Business Standard.

The acquisition will be aimed at helping the company build deeper domain capabilities in its industry verticals -- banking, financial services and insurance, retail, travel and hi-tech.

“We are continuously scouting the market,” Natarajan said. “What'll drive our inorganic growth option is to get critical mass in our service lines, particularly in infrastructure management and package application areas. I think both have opportunities in terms of scaling up substantively,” he added.

Ruling out any plans to raise funds to support the company’s inorganic growth plans, Natarajan said, Mindtree will not make a 'very large acquisition', and the buyout will be made by the funds that the company currently holds. Mindtree has a cash and cash equivalents reserves of around $200 million.

The Bangalore-based company had last made an acquisition in 2009, when it had bought Chennai-based focused infrastructure management company 7Strata. Mindtree had integrated the company with its platform and re-launched it under its brand. The business is getting 'great traction' from clients, Natarajan said.

Additionally, in line with the industry trends, Mindtree is witnessing strong demand in its key markets—the US and Europe. With the US economy showing signs of recovery and concerns over the European market settling down, most industry experts have pointed at an uptick in demand environment.

While Natarajan said, there has not been any overnight change in the market place, that demand is currently better than what it was a year ago.

He added that the company may see higher growth in the second half of FY14 in comparison to the performance in the first half. “Demand is definitely better than what it was a year ago. We certainly believe that FY14 will be better than FY13,” Natrajan said.

“Distinctly, many customers strongly believe that the US is on the path or recovery and that Europe is not going to die. So demand is getting back,” he added.

In a report published in August, Credit Suisse had stated that the recent revival in demand will particularly aid the mid-size IT companies more than their larger peers. The brokerage firm had named Mindtree among its favourites from the mid-size IT pack, and said the company’s positioning 'represents better opportunity for revenue growth relative to peers'.