The latest buzz in Satyam stake sale is that WL Ross & Co may be partnering with IBM for the bid. The speculations surface at a time when IBM has not even confirmed its interest in acquiring Satyam. Though, on Wednesday, Wilbur Ross confirmed to CNBC TV-18 that he is in the fray for Satyam, there are no clarifications yet on whether the firm will join hands with an IT giant for bidding.

Unlike other bidders, IBM’s interest in Satyam is not an outcome of the board’s decision to sell a majority stake in the fraud hit IT major. IBM had expressed its interest in acquiring Satyam way before its Rs 7,000 crore scam came out in public. Interestingly, in Satyam’s December board meeting, its founder B Ramalinga Raju had termed IBM as a hostile bidder for Satyam. IBM is learnt to have entered the race to acquire its rival IT firm through a New York based legal firm. The acquisition can potentially make IBM the global leader in SAP implementation.

The last acquisition that IBM made in India was of back office services firm Daksh eServices for $710 million in 2004. IBM’s expansion of operations in India is another indicator of its growing interest in India. It has increased its head count from 5,000 employees in 2002 to around 80,000 employees now.

Ross’s interest in Satyam too doesn’t come as a surprise as the billionaire is known for acquiring troubled firms and turning them around. In an interview to CNBC TV-18, Ross confirmed being in fray for Satyam. The firm is also understood to have completed its due diligence of Satyam. WL Ross & Co had last year in August invested $100 million in SpiceJet. Prior to that, it had invested $37 million in OCM India in 2006.

While the rationale for the interest of the two giants is clear, what still remains a matter of speculation is whether the two will partner to bid for Satyam. Reports suggest that most of the PE firms bidding for Satyam would typically partner with IT companies to sweeten their bids. The government appointed board of Satyam has too laid emphasis on the bidder's capability to manage an IT firm of the scale and complexity of Satyam. WL Ross has little experience in managing IT firms, and hence, may join hands with an IT giant.

According to an analyst with Batlivala & Karani Securities (I) Pvt. Ltd., a Mumbai based stock broking research house, “For PE firms, the motive is to invest something into Satyam and after the 3 year lock in period gets expired, catch a premium of say 50-60% on their investments. It makes sense for the PE firms to invest money because they are not short of money like IT companies which would have to arrange for a bank guarantee or a bank loan. It makes more strategic sense for WL Ross and IBM to come together and acquire Satyam rather than a pure IT company like Tech Mahindra or L&T infotech bidding for it.”

It is also unclear whether Spice Corp will eventually bid for Satyam or not as it has temporarily pulled out of the race citing lack of transparency in the bidding process. Tech Mahindra and Larsen and Toubro (L&T) have, on the other hand, publicly announced their interests in acquiring the stake in Satyam.

In the backdrop of all these speculations and assumptions, Satyam Computer Services has yet another challenge to overcome- of retaining employees. It is estimated that since January, the beleaguered firm may have lost over 13,000 employees which is one fourth of its total workforce.

The disclosure of the fraud in January would have lead to ambiguities pertaining to job security and potential lay-offs among its employees. To top it, the sale of a majority stake in the IT services company would have further increased doubts about the new management and its employee policies. Mint reports that while some of the employees have left the firm for better opportunities, other have been poached by clients who have either terminated their contracts with the firm or have decided against renewing the contracts.

According to the report, clients who have recently walked away with the Satyam employees include US based health insurer Cigna Corp, Merrill Lynch, Oceaneering International Inc., Cisco Systems Inc., Australian firm Telstra Corp, Novartis AG and State Farm Insurance Company.

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