Perot pips Wipro, TCS in race for BearingPoint unit

MUMBAI: The world may have seen a slowdown in cross-border M&A deals due to the recession, but the software sector is witnessing a frenetic pace of consolidation globally.

In a closely-fought bid that was kept under wraps, two large Indian companies — Wipro and Tata Consultancy Services — made independent efforts to acquire the European business of software major BearingPoint, but only to be pipped by the US-based Perot Systems which emerged as a front-runner.

BearingPoint Europe is currently valued at more than $700 million — about Rs 3,360 crore at current exchange rates — and would have been one of the largest out-bound acquisitions by the Indian software industry, in more than a year.

The move follows the completion of the acquisition of BearingPoint’s North American, Japanese, Chinese and Indian businesses by PricewaterhouseCoopers, as the consulting firm wanted to have a strong presence in emerging markets.

Both Wipro and TCS have denied any such move to acquire BearingPoint. However according to people close to the development and bankers involved in the exercise, the two Indian technology giants had been keen till the second stage of the acquisition process and had also accessed BearingPoint’s data room before opting out of the race due to valuation issues.

The 100-year-old BearingPoint is one of the world’s largest management and technology consultants, which was spun off as a separate firm from KPMG in 1999, but slipped into bankruptcy two years ago. Large consulting businesses have already bid and won parts of the large organisation that has a strong presence in not just the developed world, but also in emerging markets.

The European business has been a prime target for established Indian software firms. Indian service providers, which still get a majority of their revenues from the US, have been intensifying efforts to expand their client base in regions, including continental Europe.

“As usual, we do not comment on market speculation,” a TCS spokesperson said in response to an ET query. A Wipro spokesperson said: “We will be unable to comment on market speculation.”

TCS recently acquired the India-based BPO arm of Citigroup, Citigroup Global Services, for $512 million — about Rs 2,457 crore. BearingPoint provides management and technology consulting services. Even as recently as December, it was reported to have won a $250-million — about Rs 1,200 crore — contract, despite being wobbled by financial woes.

Both Wipro and TCS have been far more aggressive than the other software major, Infosys. When queried about its interest in BearingPoint, a Wipro spokesperson said: “We will be unable to comment on market speculation.” Wipro's largest acquisition to date has been that of the US-based Infocrossing for $600 million — about Rs 2,880 crore today.

“My reading is that the acquisition may have been too large for the Indian players to swallow. They were interested, but only in parts of BearingPoint's Europe businesses and not the whole firm,” said one banker on why TCS and Wipro could have dropped out.

While PricewaterhouseCoopers completed its part acquisition of BearingPoint in June, in May, another consulting firm, Deloitte took over the public services business of BearingPoint for about $350 million.