Advent International picks up majority stake in Encora for $1.5 billion

Warburg Pincus, the present majority shareholder, would be minor partner

Private equity (PE) major Advent International has acquired a majority stake in Encora, a global digital engineering services company with innovation labs in India and the US, for $1.5 billion. As part of the agreement, Warburg Pincus, the existing majority shareholder of Encora, has sold its stake and now retains a minority shareholding.

“We are thrilled to enter into this partnership with Advent as we continue to scale our differentiated software engineering service offerings,” said Venu Raghavan, chief executive officer (CEO), Encora.

He added, “Advent’s deep business and technology services sector expertise, along with its global footprint, complements Encora’s strengths and creates opportunities to grow our business in key markets around the world.”

Encora is an established leader in outsourced software product development services, using deep technical expertise in machine learning, artificial intelligence (AI), data science, cloud services and other next-generation digital engineering disciplines to accelerate strategic innovation for tech-enabled companies.

The deal signifies some of the mergers and acquisitions (M&A) activity and demand for companies in the product engineering services space. Earlier this year, Hitachi had acquired GlobalLogic in a $9.6 billion deal, one of the largest in the engineering & research and development (R&D) space.

The engineering and R&D space has, in recent times, become a significant focus for large players as engineering is a key component in the digital transformation story. For the digital segment, it is digital or software product engineering, which is the backbone of all software platform development and digital plumbing.

For the physical segment, it is industry 4.0, which is driving transformation in manufacturing and asset-intensive industries. Not present in these sectors means inability to provide a total solution and give an opening of your key customers to other competitors.

Since rebranding as Encora in 2020, the company has expanded its focus within the consumer tech and enterprise tech sectors. It has grown its global talent pool to over 6,300 associates across 40 global offices in LatAm, India, Asia-Pacific and the US.

“We have seen tremendous growth in the digital technology services sector over the past few years. This is because strong technology products have escalated across industries,” said Shweta Jalan, managing director (MD) at Advent.

Jan Janshen, managing partner at Advent, said, “We believe Encora is well positioned to capitalise on the growing digital services market. We are excited to partner with Venu, Encora’s talented management team, and Warburg Pincus to support the company’s growth in key markets across North America, Europe, India and Asia Pacific where Advent has a strong presence.”

This new partnership enables Encora to accelerate its global growth, both organically and through targeted M&A opportunities. This also helps it expand its differentiated delivery model and advance its customer-facing digital services.

Encora continues to focus on serving the software and digital engineering needs of software as a service (SaaS) companies, mid-market technology companies, and large enterprises. Advent, with $81 billion in assets as of June 30, 2021, has invested in over 380 companies across 42 countries throughout North America, Europe, Latin America and Asia.