In January, Tech Mahindra acquired CTC and two insurtech platforms which have strengthened its presence in the digital engineering services space for insurance companies.
CP Gurnani, chief executive of Tech Mahindra, said the company was now taking a more disciplined and analytical approach towards acquisitions — focusing on gaining either engineering or domain capability. “We will do it more to build our engineering capabilities. Or we will acquire businesses where we are now going to do a double click on some of the verticals,” he said.
In the past year, platforms have been an important area of focus for most IT services companies as they look to build a differentiated offering which can help drive growth and reduce the time to market for new products.
“These give us stickiness and a competitive advantage that’s integral, and that’s how we see the industry evolving,” said Vivek Agarwal, president – banking, financial services, insurance and HLS, and corporate development. He said this was a mix of technology enabled platforms as well as new business models. And the company would continue to invest actively towards this.
“As we look at our strategy going forward, it is going to be a combination of creating platforms internally, as well as making selective acquisitions,” said Agarwal.
Discover the stories of your interest
Emkay Global Financial Services said in a note that the CTC acquisition will strengthen TechM’s digital transformation expertise and expand its offerings to high-end digital engineering services for some of the largest insurance, re-insurance and financial services organisations globally. “It will scale up TechM’s near-shore delivery presence in Europe,” the firm said in a note.
Gurnani said acquisitions would be focused on either gaining domain or engineering expertise. The third dimension is that the talent (from the acquired companies) also joins the leadership team, he said.
Most of the acquisitions the company has done have been under $100 million, with the target companies having revenues of $30-50 million.
The company’s focus is on acquiring smaller companies with unique capabilities which can be then scaled up. Revenue size, said Agarwal, is an important metric that the company looks at. “All the acquisitions which we’ve done have given us a base critical mass on which we can grow and drive integration. So, from a size perspective, we will remain in that sweet spot, which lets us add value to the business apart from the business bringing something,” he said. The only exception to this was the acquisition of the Allyis Group for $125 million announced in January, which gave it access to domain knowledge in digital experience solutions, learning & development and other capabilities.
“In past nine months, Tech Mahindra has done eight capability-led acquisitions in areas such as digital experience solutions, digital transformation for BPO, Hybrid cloud and Devops, CX, consulting capabilities in EV, Mobility space, etc.,” said Prabhudas Lilladher in a note.
