Twenty-six since 2006, Idhasoft eyes more acquisitions
Software products and IT services provider Idhasoft is in final stages of talks to acquire 4-5 companies with revenues in the range of $15 million (around Rs 70 crore) and a Europe-based firm with revenues of $80 million (around Rs 380 crore).
It was only recently that the company completed the acquisition of Atlanta-based Enterpulse for $12 million (around Rs 57 crore) – its 26th since inception in 2006. This acquisition strategy has helped the company touch a revenue of $100 million (around Rs 480 crore) in FY08.
“We had a choice to grow organically as well as inorganically. The organic route would have taken some time. So we thought of taking the inorganic route with focus to acquire firms that will help us establish key services offering and then grow them,” explained Ramesh Subramaniam, managing director, Idhasoft.
The other key aspect of acquisition is the ability to cross-sell services among its client base of 1,000. Accordingly, it has acquired companies offering application practices in SAP and Oracle, clean technology and with vertical focus on healthcare, retail, manufacturing, BFSI, public sector and telecommunications.
However, Subramaniam clarified, “while inorganic growth will be 40 per cent as we have the required cash to do so, organic growth will be 60 per cent. We are already seeing the results. Last year’s acquisition made us register revenues of $70 million (around Rs 335 crore),” he added.
Earlier this month, the company received an investment of $30 million from Bahrain-based PE Arcapita and HDFC.
The company is targeting a revenue of $200 million (Rs 960 crore) in FY09 with organic growth contributing 20 per cent and the rest coming from acquisitions. It is also planning to raise $20-30 million to fund acquisitions as the current market slowdown makes it an apt time for inorganic growth, he added. However, investment bankers and analysts feel that acquiring firms in such a short time could have some negative impact on the future operations of the company.
“In any acquisition, irrespective of the size, integration is very important. In terms of technology, processes and people, and more so in case of senior management,” says an investor banker.
“Besides, the company has 25 CEOs, these people have taken 15-20 years to develop the business. Their vision on the future of the business growth needs to match. Otherwise there are enough cases where acquisitions have gone wrong,” said an analyst.