Quest seeking out more suitors for acquisitions

Quest Global, the Singapore-headquartered pure play engineering solutions company with a major presence in India, is close to acquiring the engineering services business of a few IT services firms that may be looking to sell off that part of the business to focus on their core strengths.

With many an IT services major not in a comfortable position with economic ills dogging Western Europe and the US, they are said to be focussing on their core business, with the peripheral businesses falling by the wayside. Many a software major had over a past few years announced their entry into the aerospace engineering and energy engineering verticals.

But, with the economic slowdown biting the IT services companies, they are finding the going tough as the aerospace companies are more interested in going with firms that have enough expertise in the aerospace vertical, not wanting to take any risk by going with new players. “The major players have preferred to stick with people like us rather than go with companies that entered the new line of business recently and for whom it has remained only a peripheral business,” said Ajit Prabhu, co-founder, CEO & co-chairman, Quest Global.

Quest aims to invest $200 million over the next three years, including $150 million on organic and the rest on inorganic growth. The $50 million could go into acquiring the business from software services companies.

The company hopes to see revenues of $275-300 million at the end of FY12. Meanwhile, the company is aiming to be a $500 million revenue company by 2015.

It believes it can become one as it has been growing at a CAGR of 30-40 per cent consistently over the past few years.

On the reason for the optimism, Prabhu said, as OEMs like Airbus and Boeing are focussing on newer models of aircraft such as the A320neo and Boeing 737 MAX respectively, the OEMs are outsourcing much of the work relating to its older models. “That’s proving to be a big opportunity for firms like Quest while the OEMs shift focus to their new models,” said an aviation analyst.

The company is also trying to have a more balanced focus in the make up of its portfolio as a derisking strategy. It doesn’t want to be overtly dependent on any one vertical as it could backfire when an economic crisis may hit the vertical that it’s focussed on.

Quest had recently announced the acquisition of the engineering services division of UK-based GKN Aerospace Services Ltd. “For now we won’t try to expand our business from aerospace and defence verticals as we have enough on our plate,” added Prabhu.

A new line of business Quest is entering into is that of technical documentation. EADS, the European aerospace giant, for instance outsources Euro 190 million (approximately $300 million) worth of technical documentation work. In engineering, technical documentation is any type of documentation that describes handling, functionality and architecture of a technical product or a product under development or use. It is extremely critical in the case of the aerospace sector where even one screw that’s a mis-fit is a recipe for disaster.

Sometime ago it had won the order for setting up Airbus’s offshore development centre or ODC which on Sunday has 150 people and may be scaled up to 300 people in two years. The list of customers of Quest includes Airbus, Honeywell, Baker Hughes, Caterpillar, Daimler, GE, Hamilton Sundstrand, Pratt & Whitney, Rolls-Royce, Toshiba Corp., Siemens Energy to name a few.