Infosys on Monday announced the acquisition of Lodestone Holding AG, a leading Zurich-based management consulting firm, for 330 million Swiss francs ($ 345 million or 1,925 crore rupees), which is expected to bolster business consulting capabilities.
The Swiss company will bring more than 200 customers from several industry segments, including manufacturing, automotive and life sciences, to Infosys’ existing pool of more than 700 customers. With this, the combined consulting practice based on the SAP program is expected to generate revenues of over $ 1 billion.
For the acquisition process which is expected to be completed by October this year, Infosys will pay two-thirds of the amount immediately while the rest will have to be paid after three years. Lodestone, which reported sales of 200 million Swiss francs in 2011, derives 50% of its revenue from Switzerland and 23% from Germany.
Announcing the acquisition at Infosys headquarters here, CEO and Managing Director SD Shibulal said the move “strengthens the company’s capabilities in Europe and is in line with the strategy of Infosys 3.0”. Describing the acquisition as’ strategic ‘, he said:’ Only 10% of our revenue now comes from Europe, and we expect continental Europe’s revenue share to increase.
The acquisition, he said, would expand the consulting and systems integration activities of Infosys. These companies currently account for 31 percent of Infosys’ revenue. “We emphasized that the future lies in combining advisory services and IT assets for clients, and this is the only way to create high quality growth. The acquisition also aims to balance our portfolio. Asked about the “relatively small size” of the acquisition, he said, “we are comfortable making acquisitions that represent up to 10% of our revenue”. “Acquisition is not the only way,” he said.
A big leap …
Infosys Chief Financial Officer V. Balakrishnan called the acquisition “a small step for Infosys and a big step forward for the Indian IT industry”. “For every dollar earned from counseling, we would expect to earn two to three dollars in overall revenue,” he said. Mr Balakrishnan said Infosys was investing in Europe at a time when the continent was going through upheavals, demonstrating the company’s commitment to the region’s long-term potential. “We are investing in the worst times, but it will be a game changer. This is the first step in achieving the goal of Infosys 3.0, and we are taking a series of measures to ensure high quality services, ”he added.
Mr Balakrishnan said the company’s forecast for the current quarter remained unchanged as the acquisition process was not expected to be completed until October.
Lodestone Chairman and CEO Ronald Hafner on a teleconference from Germany said: “This is a strategic and cultural adjustment, and we have found partners (Infosys), who will respond to Our needs. Among the customers who would come to Infosys, was BMW, he added.