Atos will pay US$3.4 billion, or US$41.0 per Syntel share, for the company, which is about 14.7 times Syntel’s earnings before interest and taxes over the past 12 months, according to Bloomberg.
By merging with Syntel, Atos intends to take advantage of solutions in cloud, mobile, social networks, data analysis, and internet of things (IoT), and hopes to add US$1 billion to its annual revenue.
“The highly complementary portfolio, customer base, and geographic footprint of the combination between Atos and Syntel will significantly enhance our presence in North America and accelerate the digital transformation of Atos’s customers worldwide,” said Thierry Breton, Chairman and CEO of Atos in a press release.
Almost 90% of Syntel’s sales come from North America, with its top three customers alone – American Express, State Street Bank, and FedEx – accounting for 45% of its revenue. The bulk of its 23,000-person workforce is based in India.
Atos was apparently seeking a wider foothold in the United States, because the earnings it reported last week showed revenue and operating profits fell in North America in the first half of the year.
Founded by Indian-American Bharat Desai, Syntel runs dozens of global development centers in Scotland, Poland, and the Philippines, in addition to India. Desai founded Syntel after graduating from the Indian Institute of Technology, a prestigious technology school that produced the likes of Google CEO Sundar Pichai and Microsoft CEO Satya Naddela.
Syntel was among the first Western companies to set up software development centers in India. Such centers laid the foundation stone for India’s phenomenal growth in the global IT services industry.
Atos seems to be following in the footsteps of its domestic peer Capgemini in its hunt for deep-pocketed financial services providers in North America. When Capgemini purchased iGates in 2015, it gained access to large US banks and a large pool of technology professionals in India. Syntel is similar to iGates, say analysts.