Patni buys Californian IT services firm for $68mn

Acquisition to jumpstart domestic tech firm's position in telecom.

In what could be the largest overseas acquisition by a domestic IT services company, Patni Computer Systems has entered into an agreement to acquire California-based Cymbal Corporation for $68 million in an all-cash deal.

The acquisition will be made through Patni's wholly-owned US subsidiary and will be paid for over a period of time.

Patni has not only beaten industry giants Tata Consultancy Services (TCS) and HCL to make its first overseas acquisition, it also leaves tech giants Wipro and Infosys behind in terms of the size of the deal. Infosys had acquired Expert Information Services for $22.9 million while Wipro had bought NerveWire for $18.7 million and American Management Systems' global energy practice division for $26 million.

The $20 million Cymbal Corporation is an IT services company focussed on the telecommunications industry. Industry observers pointed out that the acquisition would give Patni a jump-start into the rapidly growing telecommunications services market where other companies like Infosys and TCS have already established a strong presence.

The company is currently in the process of getting the necessary regulatory approvals and the deal is expected to be sealed in another month or two. It is not clear whether Patni will merge Cymbal with its US subsidiary or run it as a separate company.

It is also not known whether it will retain Cymbal's US management and staff post-acquisition. Company officials were not available for comment. The company will fund the acquisition partly from the proceeds of its initial public offer, and partly from internal accruals.

Patni was advised by Kotak Investment Bank on the deal while Cymbal was advised by Avendus Advisors.

Cymbal has an employee and consultant base of over 500 professionals in seven global offices, including offshore delivery centers in Hyderabad and Pune. The company has been on the block for a while and was negotiating with a number of companies, including Indian ones.

Cymbal provides consulting, systems integration, and outsourcing solutions to clients in the telecommunications industry. The company's profile as a pure-play telecommmunications services company is similar to that of Mahindra British Telecom, the only such Indian company in telecom.

Its customer list includes 14 of the world's largest communication service providers across the wireline, wireless, cable, broadband and voice over Internet protocol markets.