CAPGEMINI PAID A LOT TO SECURE PLACE IN THE US

Santosh Kumar Singh

CAPGEMINI’S IGATE BUY EXPENSIVE, BUT JUSTIFIED DUE TO COMPANY'S STRONG HOLD IN NORTH AMERICA

IGate’s Strong hold in North America

Deal value is justified given the IGate's strong foothold in the North American market, which has been the biggest outsourcing market for IT vendors.

Cap Gemini predominantly serves Europe with over 70% revenue coming from the region. After the acquisition, the Europe share will reduce to a half.

Paid 3.2 times IGate's annual revenue of $1.2 billion in 2014

This ratio was around 1.6 times in some of deals in last 4

Deal value is over 15.3 times IGate's earnings which is marginally higher than the Bloomberg median of 14.6 for similar deals

Capgemini’s IGate buy expensive

IGATE’S DEAL VALUE-FURTHER JUSTIFIATIONS

Capgemini's EPS (earnings per share) is expected to improve by 12% in CY16 and by 16% in CY17 due to the acquisition

IGate's revenue increased at a three-year compounded annual growth rate (CAGR) of 18% in 2014

IGate buyout by Capgemini will add IGate’s scale and efficiencies to Capgemini. IGATE, which has strength in the financial services sector, has grown quickly since its 1996 stock market listing.

IGATE employs 33,000 people globally, with 75 percent of them in India. The combined company would have more than 100,000 employees there, or 48 percent of its workforce.

REFERENCE

Economic Times -http://economictimes.indiatimes.com/tech/ites/capgeminis-igate-buy-expensive-but-justified-due-to-companys-strong-hold-in-north-america-experts/articleshow/47076309.cms?intenttarget=no