Infosys ushers in its new acquisition strategy with the $200m pickup of Panaya. Never a habitual dealmaker – the IT outsourcer has averaged less than one transaction a year, rarely spending more than $50m – its past M&A efforts have focused on IT and BPO vendors. With the purchase of Panaya, Infosys is taking a different track.
Since taking the helm last fall following a series of management departures amid shrinking market share, CEO Vishal Sikka has announced that ‘big data,’ artificial intelligence and, of course, ‘innovation’ would be the hallmarks of Infosys’ growth strategy. The Panaya buy shows that he meant it. Panaya sells software for managing and automating updates to ERP systems. That has clear cost synergies with Infosys’ core business, and also presents opportunities to expand new lines of revenue.
Not only is this Infosys’ first software acquisition, the valuation is well beyond what it’s accustomed to paying. Infosys’ management says the price tag values Panaya at 6x revenue. While they wouldn’t specify if that’s forward or trailing revenue, either of those is well past the 1-2x TTM revenue that Infosys paid in most of its prior deals (entirely services businesses).
We’ll have a more detailed report on this transaction in tomorrow’s 451 Market Insight.
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