French information technology services company Capgemini and US-based consulting, technology and outsourcing service provider Computer Sciences Corporation (CSC) are in the fray to acquire independent software testing company AppLabs.
Based out of Philadelphia, AppLabs has close to 1,800 employees at its global delivery centre in Hyderabad. At present, its revenues stand at $110 million (Rs 508 crore). According to industry experts, the valuation is likely to be over Rs 1,200 crore.
Through the acquisition, both contenders seek to shore up their capabilities in the global testing space, which according to analyst group Nelson Hall’s estimates, is growing at a fast click to touch $38 billion by 2012.
Leveraging various acquisitions, including Australian software testing company Nu Solutions, Capgemini has a stronghold in the managed testing services space. CSC, which has significant presence in India, offers next-generation services like testing-as-a-service on the cloud.
“The company is weighing two options — either being acquired if it gets a good valuation or tapping into a new venture capital firm — to provide a healthy exit route to existing investor Sequoia Capital,” an AppLabs official, who didn’t want to be named, told Business Standard.
Sashi Reddi, AppLabs’ founder and chief executive, and CSC officials were not available for comment. A Capgemini official said, “We do not comment on market speculations.”
Between 2004 and 2007, AppLabs had raised $17 million from Sequoia Capital to part fund its inorganic growth plans. It had earlier acquired three companies — KeyLabs for $7 million in 2005, IS Integration for $37 million in 2006 and Hyderabad-based ValueMinds for an undisclosed sum in August 2010.
“Sequoia, whose holding period in companies that it invests is typically five years, plans to exit the company soon. Active talks are on with Capgemini and CSC, besides with various venture capital firms. We expect either of the deals to reach fruition within this month,” the official said.