Wipro snags Appirio for SaaS scale

Contact: Scott Denne

Wipro makes the latest and largest bid to bring SaaS expertise to its systems integration business with the $500m acquisition of Appirio. Accenture, CSC and IBM have all inked recent nine-digit deals for similar companies. None of their targets were quite as large as Appirio, which was cresting $200m in annual revenue at the time of its exit.

In terms of valuation, Appirio’s multiple occupies the lower part of the narrow band of valuations on comparable transactions. Bluewolf fetched 2.7x in its sale to IBM last March. Cloud Sherpas got the same from Accenture in September 2015. Fruition Partners came in at 2.4x when it was purchased by CSC in August 2015.

With Appirio, Wipro gets the last independent SaaS vendor with significant scale. Appirio’s size was likely a draw for Wipro, which will need to do more M&A as it stretches for an ambitious revenue target. When Abidali Neemuchwala took the helm in February, the company promised to get its revenue to $15bn by 2020. Wipro finished its most recent fiscal year with $7.7bn, up 9% from the previous year.

It will need about 18% growth per year to hit its target and has already been uncharacteristically aggressive in pursuit of that. In February, the company paid $460m for HealthPlan Services and with Appirio it has now inked two $400m+ deals in a single year. Prior to 2016, Wipro had only spent more than $100m on two transactions in the entire previous decade.

M&A isn’t the only ingredient in its drive to hit $15bn. The company has reorganized about a half dozen themes where it can find growth above and beyond the core IT infrastructure services market. One of those themes is a focus on digital design and customer experience consulting. In that respect, Appirio and Wipro are aligned. Consulting generates just roughly 5% of Wipro’s business – Appirio itself has spent the past year adding digital design capabilities.

William Blair & Company advised Appirio on its sale (as well as Bluewolf and Fruition on their exits).

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