Geometric more than just a value buy for HCL Tech

Firm had to fight three other bidders for the engineering capabilities of the Mumbai-based firm

HCL Technologies acquisition of Geometric may look like a value deal but the company had to fight with three other bidders for the engineering capabilities that the Mumbai-based firm has.
 
Other than HCL Technologies, Tech Mahindra, France-headquartered Altran Tecnologies and the $12 billion US-based Allegis Group too had made bid to acquire Geometric.
 
“But what made the deal go to HCL was the fact that they had the best structure and they were fast to drive the deal to conclusion,” said a person involved in the deal on condition of anonymity. HCL Technologies did not agree for an interview for the story as it is in silent period before the quarter results.

 

What also made the deal move fast was the fact that it was being driven directly from Shiv Nadar’s office with an active role played by Bejoy George, SVP and global head (Aero, Auto & Industrial) at HCL Technologies.
 
Geometric founder and CEO Manu Parpia initially did not want to sell off the company, the idea was to raise funds for further expansion, but financial advisor J M Financials (Singapore) recommended that greater value for the customers and employees would come if it is merged or sold off to a bigger player.
 
The process for the sell off started in October 2015, with bids coming in by the first week of December and final negotiations started in January-February time frame. The process would have been much faster but for the role played by Dassault Systemes with which Geometric had a joint venture.

 
“The JV is unique in the sense that it caters to only one client and that is Dassault. Every bidder who saw it said that they would like to get an assured business, however the French firm Dassault was not forthcoming. So the only way out was for Dassault to buy Geometrics share in the JV,” said the source.
 
When contacted Parpia, he choose not to comment on the details, but said that the deal is fair and reasonable for the shareholders and employees. “We are getting a very reasonable and fair deal. The funds goes straight into the hands of the shareholders. In both the case they get listed stocks and as promoters we are not getting any premium,” he said over a telephonic interview.

 
The press release from Geometric says that’s shareholders (including promoters) will receive the same consideration per share of Geometric . Appropriate transaction documents have been signed which include representations and warranties from the promoters of Geometric to both HCL Technologies and Dassault Systemes.
 
The acquisition of Geometric also signifies a trend that shows IT services firm strengthening their engineering services play. In December last year, PE player Bain Capital acquired minority stake in engineering services firm QuEST for $350  million. Before that QuEST in 2014 had acquired NeST Group.
 
For HCL Technologies the acquisition will mean expanding ite reach and talent base in the highly niche engineering services segment. The engineering services business at HCL Tech is about $1.2 billion business. With acquisition of Geometric it will get close to 80 clients in the US and Europe with 2,606 employees.