Wipro will acquire London-based global management and tech consultancy Capco for $1.5 billion to bolster its presence in the banking, financial services & insurance space. The deal, which is Wipro’s largest acquisition ever, will also give the Indian tech services giant a strong consulting footprint.
The deal comes under CEO Thierry Delaporte, who took over in July last year, and demonstrates a desire to regain the momentum the company has lost to rivals over the past several years. Wipro’s other big acquisitions include those of US-based cloud consultancy firm Appirio for $500 million in 2016, and of UK-based Infocrossing for $600 million in 2007.
Capco clocked $700 million in revenue in the 2020 calendar year. Wipro said the acquisition creates a global financial services business of $3.2 billion, up from the current $2.5 billion, with a strong consulting and business transformation footprint.
Capco, founded in 1998, gives Wipro access to 30 new large BFSI clients. It has over 5,000 consultants based in more than 30 global locations across 16 countries. It works with more than 100 clients and has many long-standing relationships with leading financial institutions.
The all-cash transaction is expected to be completed during the June quarter, subject to regulatory approvals and customary closing conditions. The transaction will be financed through internal cash and debt. Wipro has some $6 billion of cash reserves.
BFSI is a big spender on technology and is the largest industry vertical for the major IT services companies, accounting for almost a third of the revenue for many of them. Compared to TCS, Cognizant and Infosys, Wipro is weak in BFSI. The Capco acquisition seems to be an effort to address this gap.
Wipro believes there are significant synergies to be realised through cross-selling opportunities. Capco is said to be highly complementary to Wipro’s capabilities in building digital technology and operations solutions for helping clients achieve their transformation objectives.
Delaporte said, “Together, we can deliver high-end consulting and technology transformations, and operations offerings to our clients. Wipro and Capco share complementary business models and core guiding values, and I am certain that our new Capco colleagues will be proud to call Wipro home.”
Lance Levy, CEO of Capco, said, “We are incredibly excited to join our new colleagues at Wipro. Together, we will offer bespoke transformational end-to-end solutions, now powered by innovative technology at scale, to create a new leading partner to the financial services industry.”
In its investor presentation, Wipro said the acquisition will dilute Wipro IT services ebit (earnings before interest and taxes) margins by 2% in the first year, a large component of which will be a non-cash charge. It said margins will improve in the future based on revenue and cost synergies.
Although revenue synergies and growth acceleration are the primary objectives of the acquisition, there are identified cost synergies to be realised post-integration, Wipro said.