Infosys, on Monday, announced the acquisition of Zurich-based Lodestone Holding AG, a leading management consultancy firm, for 330 million Swiss francs ($345 million or Rs.1,925 crore), which is expected to strengthen the company’s consulting capabilities.
The Swiss company will bring in more than 200 clients from across several industry segments, including manufacturing, automotive and life sciences, to Infosys’ existing pool of over 700 clients. With this, the combined consulting practise based on the SAP programme, is expected to bring in revenues of more than $1 billion.
For the acquisition process that is expected to be completed by October this year, Infosys will pay two-thirds of the amount immediately while the rest is to be paid after three years. Lodestone, which reported revenue of 200 million Swiss francs in 2011, derives 50 per cent of its revenues from Switzerland, and 23 per cent from Germany.
Announcing the acquisition at Infosys headquarters here, Chief Executive Officer and Managing Director S. D. Shibulal said that the move “strengthens the company’s capabilities in Europe, and is in line with the Infosys 3.0 strategy.” Terming the acquisition as “strategic,” he said: “Only 10 per cent of our revenues now come from Europe, and we expect the share of revenue from Continental Europe to increase.”
The acquisition, he pointed out, would expand Infosys’ consulting and systems-integration business. At present, these businesses contribute 31 per cent of Infosys’ revenues. “We have been highlighting that the future is in combining consultancy services and IT assets to the clients, and this is the only way to create high quality growth. The acquisition is also aimed at balancing our portfolio.” Asked about the relatively “small size” of acquisition, he said: “we are comfortable making acquisitions that are up to 10 per cent of our revenues.” “Acquisition is not the only way,” he said.
A great leap…
Infosys Chief Financial Officer V. Balakrishnan termed the acquisition as “a small step for Infosys, and a great leap for the Indian IT industry.” “For every dollar earned through consulting, we expect to earn two to three dollars in overall business,” he said. Mr. Balakrishnan said Infosys was investing in Europe at a time when the continent was going through turmoil, which demonstrated the company’s commitment to the area’s long-term potential. “We are investing in the worst of times, but this is going to be a game changer. This is the first step to achieve Infosys 3.0 goal, and we are taking a series of steps to ensure high quality services,” he added.
Mr. Balakrishnan said that the company’s guidance for the current quarter remained unchanged because the acquisition process was to be completed only by October.
Lodestone Chairman and CEO Ronald Hafner, via a tele-conference from Germany, said: “This is a strategic and cultural fit, and we have found partners (Infosys), who will fulfil our needs.” Among the clients, who would come to Infosys, included BMW, he added.