Quintegra buys Virginia firm

Downgrading its earlier $49-million (Rs 193 crore) valuation of Virginia-based Pingho Associates Corporation (PA Corp) by 32 per cent, Quintegra Solutions has completed acquisition of PA Corp in an all-cash deal for $37 million (Rs 146 crore) last week.

The offer price is over three times PA Corp's current EBITDA margins.

The initial baseline cost of the acquisition was $20 million, with $29 million to be paid out as earnouts linked to PA Corp's EBITDA margins over three years.

After subsequent negotiations, Chennai-based Quintegra Solutions revised the baseline cost of acquisition to $23 million (Rs 91 crore), with $14 million (Rs 55 crore) to be made as earnout payments to PA Corp based on EBITDA performance.

Quintegra had announced the acquisition on October 18 this year at the $49-million buyout price, but subsequently downgraded the purchase price.

"We also took into account PAC's profit after tax figures over the last few quarters adjusted against their EBITDA margins and performance outlook while negotiating for a lower cost of acquisition. The final question was one of building competencies on both sides, where in this case, it is a win-win situation," Shankarraman Vaidyanathan, chief executive officer, Quintegra Solutions, said.

PA Corporation, with a workforce of 365 people currently, is likely to be under pressure to improve its operating margins by at least 3 per cent in calendar 2008.

PA Corp showed profits of $6 million (Rs 24 crore) on revenues of $61 million (Rs 240 crore) for the year ended December 31, 2006, and expects to report profits in excess of $7 million (Rs 28 crore) on revenues of $70 million (Rs 276 crore) in the current year.