Persistent Systems to acquire SCI, Shree Infosoft for $60 million

IT firm Persistent Systems on Wednesday said its US subsidiary will acquire North Carolina-based Software Corporation International (SCI) and its affiliate, Fusion360 for $53 million

IT firm Persistent Systems on Wednesday said its US subsidiary will acquire North Carolina-based Software Corporation International (SCI) and its affiliate, Fusion360 for USD 53 million - a move that will bolster its expertise in serving banking, financial services, and insurance (BFSI) clients.

The Pune-based company has also announced the acquisition of the business of New Jersey-based Shree Partners, including its subsidiary in India for USD 6.87 million.

Persistent Systems Chief Executive Officer and Executive Director Sandeep Kalra said the company continues to see rapid acceleration of digital transformation with its financial services clients, requiring not only technology but domain expertise in areas like Payments and regulatory compliance.

"With the addition of SCI and Fusion360, we are forming a new Payments business unit and expanding our BFSI expertise as well as client portfolio," he added.

In a regulatory filing, Persistent said Persistent Systems Inc, USA - a wholly-owned subsidiary of the company has entered into a Stock Purchase Agreement with Software Corporation International and its affiliate, Fusion360 LLC to acquire Software Corporation and Fusion360 (together referred to as SCI).

The acquisition is subject to customary closing conditions which are expected to be completed within two weeks, it added.

The total purchase consideration payable for the acquisition of SCI is USD 53 million, which includes an upfront payment of USD 34.45 million to shareholders of SCI (subject to customary adjustments for working capital, debt, and cash on closing), earnout (shareholders of SCI will be eligible for a maximum amount of USD 5.96 million per annum over next two years) and retention payment.

The filing noted that the earnout amount is contingent on the achievement of certain performance thresholds.

Key employees and consultants of SCI will be eligible for an aggregate amount of USD 2.21 million per annum at the end of year 1, year 2, and year 3 (retention payment).

SCI's consolidated revenue stood at USD 17.08 million in CY2020.

Talking about the deal with Shree Partners, Kalra said the transaction expands "our Cloud and IT Infrastructure capabilities in BFSI and Travel and Hospitality".

"Importantly, these acquisitions bring us new points of presence in Charlotte, North Carolina, and the National Capital Region (NCR), India, bringing in new digital transformation talent to serve our clients, he added.

The filing noted that Persistent Systems has entered into an agreement with Shree Infosoft to acquire its business.

Along with this transaction, Persistent - through its wholly-owned subsidiary in the US - will acquire certain assets from Shree Partners LLC, USA, which is the parent company of Shree Infosoft.

The acquisition is subject to customary closing conditions, which are expected to be completed within 3-5 weeks, the filing said.

Shree Partners and Shree Infosoft had consolidated revenues of USD 7.6 million for the year ended March 31, 2021.

"The acquisition provides strategic benefits by enabling Persistent to deliver critical services to a strategic client which is a leader in the global claims management industry. Shree's expertise also expands Persistent's BFSI footprint in the cloud, data, and infrastructure domains," the filing said.

This acquisition also adds a new delivery location for Persistent in the National Capital Region (NCR), it added.

The purchase consideration payable for the acquisition of business and assets of Shree Infosoft and Shree Partners LLC is USD 6.87 million, the filing said.

In addition to the upfront of USD 2.37 M in the US and USD 1 million (Rs 7.35 crore) in India, contingent consideration will include earnout (shareholders of Shree Partners LLC will be eligible for a maximum amount of USD 1.5 million per annum over the next two years) and retention payment, wherein key employees will be eligible for an aggregate amount of USD 500,000 over the next three years.

The earnout component is contingent on the achievement of certain performance thresholds, the filing said.