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Last week French IT consulting company Cap Gemini acquired Kanbay International Inc. for $1.25 billion. This had doubled Cap Gemini's staff in India which will help win more contracts. Illinois-based Kanbay employs most of its 6,500 employees in India. The purchase will help Cap Gemini capitalize on a trend of financial industry jobs from accounting and insurance claims processing to analysis shifting from the West to low-cost destinations like India. It will also give Cap Gemini new clients including HSBC and Morgan Stanley. The company said the deal will boost Indian operations by 89 percent and U.S. consulting sales by 45 percent.

Lazard Freres et Cie. and Morgan Stanley advised Cap Gemini on the acquisition. UBS Securities LLC was the adviser for Kanbay.

Kanbay Acquisition To Spur M&As

According to this article in The Economic Times, more and more multinationals could be looking for buys over the next 12 months. Two large deals - Capgemini’s buyout of Kanbay International and EDS' buyout of MphasiS a few months ago - have significantly increased the acquirers' India services delivery capability. This can become a trend as more MNC companies can look at buying specialists - small to mid-tier Indian IT vendors.

So who are the potential candidates?

The paper, quoting analysts, says the companies such as L&T Infotech, RealQ, Mastek, Motif, MindTree, Nucleus Software, Symphony Services and others with skills in areas spanning SAP implementation, banking, insurance, testing and online trading, are are the likely candidates.

It says the valuations are in the region of 2.5 to three times revenue multiples. It also says that small and mid-tier players with specialists services are more attractive rather than generic ‘me-too’ players as they have built a strong delivery capability in the area.

Read - Kanbay deal likely to trigger IT M&As