Forrester says L&T, IBM top in Satyam race

Based on the available data and interactions with some bidders and Satyam Computer Services’ clients, independent technology and market research firm, Forrester, believes that engineering giant Larsen & Toubro and IT major IBM are front-runners to acquire the troubled company.

Among large Indian business conglomerates, “Larsen & Toubro is a clear leader,” said Sudin Apte, head of Forrester India.

By and large, all firms in the running would be in a position to pay the required money, possibly even a premium, said Forrester, adding that L&T had the most service overlap and relevant IT industry experience. Its reputation, ability to manage mergers and acquisitions, and relationships with government agencies made it the most likely winner, said Apte, adding, “Its early approach to investors like LIC will make it easier to pull through the 31 per cent equity deal. Others in this camp have limited IT services experience.”

Among onshore global IT services firms, IBM was the front-runner, said Apte. “Though most firms in this group are not officially commenting, multinational services firms have emerged as an interesting group from the clients’ perspective. Factors like size, client relationship and service line overlap are in favour of firms like IBM. Most firms in this camp also have a good experience of handling mergers and acquisitions (M&As) in India,” he said.

IBM bought Daksh BPO and a niche testing firm. Since most foreign firms in the race are headquartered in the US, they will score well on clients’ corporate governance concerns, says Apte.

On private equity (PE) firms, Apte said: “While PEs can surely pull off the deal commercially and even retain Satyam’s independent status, clients will lack confidence in this group. Doubts about PEs selling stakes immediately after the lock-in period, giving preferential treatment to their portfolio companies over existing clients, and lack of technical IT service businesses will be other challenges.”

General Atlantic Partners, he said, stood tall in this group, with its long experience offshore and first-hand experience of investments in Patni and Hexaware. This camp also has the potential to use this deal as the first step in future industry consolidation.