Tech Mahindra pulls out of race to acquire Mphasis

Company no longer in fray to acquire the Bengaluru-based IT services firm as competition hots up

Tech Mahindra has decided to pull out of the race for Mphasis to avoid a bidding war with other suitors.

“Tech Mahindra is no longer contesting to acquire Mphasis,” sources privy to the development told Business Standard. A company spokesperson declined to comment on the matter.

Tech Mahindra was till recently seen as a serious contender for Hewlett Packard’s 60.5 per cent stake in Mphasis in a deal worth over $1 billion. Reports said private equity firm Blackstone was preparing to back Mphasis Chief Executive Officer  Ganesh Ayyar for a management buyout and was preparing to submit a bid soon. Blackstone will face competition from Apollo Global Management, another contender.

Analysts said the Mumbai-headquartered Tech Mahindra was a value acquirer, its only large acquisition being Satyam, the scandal-ridden information technology services company it bought in 2009 after a bidding war with L&T Infotech. Tech Mahindra’s interest in Mphasis was driven by its strength in financial services.  Tech Mahindra is trying to build this business segment, which provided 9.8 per cent of its revenue in the December quarter. Rivals TCS, Infosys and Cognizant derive between 30 and 45 per cent of their revenue from financial services.

Another reason Tech Mahindra may have pulled out of the race could be the threat from Blackstone, an aggressive bidder. The PE firm has said it will invest $2.5-3 billion in India over the next five years.

NOT IN THE FRAY

• Tech Mahindra was till recently seen as a serious contender for Hewlett Packard’s 60.5% stake in Mphasis
   
• Reports said private equity firm Blackstone was preparing to back Mphasis CEO Ganesh Ayyar for a management buyout and was preparing to submit a bid soon
   
• Tech Mahindra’s interest in Mphasis was driven by its strength in financial services
   
• Apart from Tech Mahindra and Blackstone, Apollo Global Management was also seen as serious player to acquire Hewlett Packard’s stake in Mphasis
   
• Another reason Tech Mahindra may have pulled out of the race could be the threat from Blackstone, an aggressive bidder