Transaction Analysis
hiSoft Technology International Ltd. to Acquire VanceInfo Technologies Inc.
Financial Overview:
- Transaction Value: $531.21 million
- Transaction Structure: Stock
- Implied Enterprise Value: $438.65 million
- EV/ LTM Revenue: 1.4x
- EV/ LTM EBITDA: 15.7x
martinwolf Analysis:
- hiSoft Technology International Ltd. (NASDAQ: HSFT) signed an agreement on August 10th to acquire VanceInfo Technologies Inc. (NYSE:VIT) for approximately $530 million in stock.
- hiSoft shareholders and VanceInfo shareholders will each own approximately 50% of the combined company.
- The stock prices for both companies dropped after the deal was announced: VanceInfo fell 19 percent, hiSoft fell 7 percent.
- hiSoft CEO, Tiak Koon Loh, will become CEO of the combined company, and VanceInfo CEO, Chris Chen, will become non-executive chairman.
- The combined company, with expected 2012 revenue of $670 million, will be the largest China-based offshore IT services provider by revenue according to the press release.
 - Together, they will provide complementary services - VanceInfo offers software development and maintenance, while hiSoft focuses on technology outsourcing. The companies create an IT outsourcing powerhouse - effectively, a Chinese Infosys in the making.
- The two companies have a significant international sales footprint: hiSoft garners 77% of its revenue outside China, VanceInfo receives 52% of its revenue outside China (mainly Hong Kong and Macau).
- The combined companies will have better economies-of-scale, offsetting the current increasing wage and real estate prices in China. Its international footprint helps counterbalance lower revenue margins on domestic China sales.
- The new company will be better positioned to service the U.S. market, which still has the highest demand for outsourcing services.
- The deal is an aggressive step that shows bold leadership by hiSoft in an attempt to counter the competitive threats that it faces.
Please click here to read the press release.
Source: CapitalIQ
martinwolf was not the adviser in this transaction.
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About martinwolf
San Francisco, CA Bangalore, India
With offices in San Francisco and Bangalore, India, martinwolf is a leading middle market M&A Advisory focused on companies with services-based business models. Since 1997, our team has completed more than 115 transactions in six countries. We are a five-year member of the Merrill Lynch PS Referral Network, and were selected as ICICI Bank's (India's leading private bank) exclusive strategic partner for acquiring U.S. IT companies. martinwolf is a member of FINRA and SIPC. For more information, visit www.martinwolf.com.
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© martinwolf 2012
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