Wipro to Buy Capco Consultancy Firm for $1.45 Billion in Biggest Buyout

Set to be its biggest ever buyout, Wipro will acquire London-headquartered Capco in a USD 1.45 billion (roughly Rs. 10,5700 crores) deal as the Indian IT major seeks to become a “bolder and ambitious” company as well as rake in higher revenues from banking and financial services space.

Announcing the deal on Thursday, Wipro said the acquisition will provide it access to 30 new large banking and financial clients and strengthen its position in the Banking, Financial Services and Insurance (BFSI) sector.

“… important announcement of a transformational acquisition, the largest in our history as Wipro. We will be acquiring Capco for a value of USD 1.45 billion (roughly Rs. 10,570 crores). Capco will bring to us over USD 700 million (roughly Rs. 5,100 crores) in revenue, and over 5,000 consulting and domain specialists based across the globe,” Wipro Chairman Rishad Premji said during an analysts’ call.

He also noted that with this acquisition, Wipro will join a select league of service providers that bring an integrated and end-to-end consultative digital, cloud, and IoT transformation solution at scale to customers.

“The banking and financial services industry is our largest sector globally, and a high priority and growth segment for us…Capco will bring significant scale in our BFSI business, a highly complementary set of service offerings, creating a unique combination of consulting and domain led expertise with scale, digital technology and operations. This, we believe, will drive accelerated growth,” he said.

The BFSI segment accounted for over 30 per cent of Wipro’s IT services revenue in the December 2020 quarter that stood at USD 2,071 million (roughly Rs. 15,090 crores).

Wipro has followed an aggressive acquisition strategy over the years to bolster its business. During the financial year 2020-2021, Wipro has bought/ acquired stake in Eximus for USD 80 million (roughly Rs. 580 crores), 4C for EUR 68 million (roughly Rs. 590 crores), and IVIA for USD 22.4 million (roughly Rs. 160 crores), and Chennai-based Encore Theme Technologies for 83.4 percent equity stake for up to Rs 95 crore.

The deal will expand Wipro’s presence into a set of large strategic customers that are uniquely complementary to the company’s existing customer base as well as provide a platform to leverage the deep relationships that Capco has built over the years with CXOs and business leaders of several large customers, Premji explained.

The deal also comes at a time when businesses globally are betting on technology and increasing their spends on digital to support growth during the pandemic.

“I had shared with you that you will see a bold Wipro, a more ambitious approach, one that will be more risk taking, one that will not be afraid to shake up the applecart to make tough calls to invest in deep tech. And to think big. This acquisition fits well into that strategy and will pave the path of building a bold tomorrow for Wipro,” he said.

Wipro CEO Thierry Delaporte said the transaction is being financed through internal cash and debt, and that the acquisition is subject to regulatory approvals. It is expected to close in the quarter ending June, 2021, subject to requisite regulatory approvals and customary closing conditions.

After completion of the transaction, it will be EPS (Earnings Per Share) accretive from the third year onwards.

Delaporte pointed out that there are five reasons as to why Capco is a great fit for the company.

“Acquiring Capco helps us grow our global financial services business, which is our largest segments from USD 2.5 billion (roughly Rs. 18,200 crores) to USD 3.2 billion (roughly Rs. 23,300 crores), with a strong consulting footprint. Scale matters and reinforces our market relevance,” he said.

Delaporte added that the transaction will also help in growth acceleration on account of the complementary customer profile between Capco and Wipro’s BFSI business, and synergy in the solutions offered by the two firms.

Besides, Wipro will be able to leverage the relationships that Capco has with key decision makers at the board level (CEOs etc) as well as access to the “exceptional” talent of the London-based company.

Capco CEO Lance Levy said the companies will together 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.

“We look forward to leveraging the complementary capabilities and similar cultures of both companies to drive industry change and offer exciting opportunities for both our clients, and our people,” Levy said.

Capco will continue to operate as a separate entity under the leadership of Levy, who will report to Delaporte.

“To ensure that we leverage relationships, expertise and capabilities, we will have an integrated strategy and execution approach for common clients. While we work in the model, we will learn together,” Delaporte said.

He added that the acquisition will affect Wipro’s IT services margin by 2 per cent in FY22, a large component of which is a non-cash charge.

Wipro, in a regulatory filing, said clients will benefit from a combination of its capabilities in strategic design, domain and consulting, digital transformation, cloud, cybersecurity, data, and IT services with Capco’s deep domain and consulting capabilities across banking, payments, capital markets, insurance, risk, and regulatory offerings.

Founded in 1998, Capco works with more than 100 clients and has many long-standing relationships with the world’s leading financial institutions. It has over 5,000 consultants based in more than 30 global locations across 16 countries. The company’s consolidated revenues for the year ended December 2020 was USD 720 million (roughly Rs. 5,250 crores).

The deal will require anti-trust approvals under the competition laws of the US, Germany, Canada, Brazil, and Austria along with other regulatory approvals, the filing said.

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