Software services firm Tech Mahindra Ltd has agreed to acquire the UK-based fintech firm Target Group in an all-cash deal valued up to £120 million ($175 million or Rs 1,175 crore) including debt to boost its offerings in the banking and financial services segment.
The deal amount comprises £112 million in enterprise value and up to £8 million as adjustment of surplus cash, the Indian company said in a statement.
Target Group provides business-process-as-a-service (BpaaS) offerings to financial institutions such as Goldman Sachs, Morgan Stanley and Credit Suisse. The acquisition strengthens Tech Mahindra’s presence in the UK's financial services industry through Target's intellectual property (IP) and proprietary platform that automate processing, servicing and administration of loans, investments and insurance products.
“Target Group’s strong IP and disruptive proprietary platform significantly enhances our fintech offerings,†said CP Gurnani, Tech Mahindra's managing director and CEO.
Tech Mahindra, part of the diversified Mahindra Group, joins bigger rivals Wipro Ltd and Infosys Ltd in acquiring overseas companies this year to strengthen their offerings.
Wipro, India’s No. 3 software services exporter after Infosys and Tata Consultancy Services, agreed in February to purchase US-based HealthPlan Services for $460 million in its second-biggest acquisition ever. This was Wipro's second acquisition of a US-based BPaaS provider since December when it agreed to take over Viteos Group for $130 million.
Also in February, Infosys struck its second-biggest M&A ever as it signed a deal to buy US-based automation technology firm Panaya Inc at an enterprise value of $200 million.
Tech Mahindra itself is not new to acquisitions. It took over the fraud-hit Satyam Computer Services in 2009 and has struck deals in recent years. In November 2014, Tech Mahindra signed a pact to acquire US-based global network services provider Lightbridge Communications Corporation for $240 million.
Deal details
Tech Mahindra will pay up to £64 million upfront and a 2017 deferred consideration of up to £16.28 million for the Target Group deal. It will also pay back £17.1 million on account of loan notes at closing.
Also, Target's management is rolling over 7.6% of their stake into the company (worth £6.8 million) and this will be paid out in 2020 as a second deferred consideration.
Target Group has about 740 employees. It had revenue of £51 million in 2015. Target Group will remain a standalone entity and its entire management team will continue to have full operational responsibility, Tech Mahindra said.
The transaction is likely to close in the July-September quarter, subject to the receipt of regulatory approvals, Tech Mahindra said.
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