Cross-border mergers and acquisitions have fueled the Indian IT Services industries growth in recent years, helping companies achieve scale and win new customers in new geographies. With this has come higher enterprise valuations.
But going forward, Indian IT companies must look at cross-border M&A as more than a way to gain new customers in new markets. In today's world, "what you do" matters as much as or more than geographic footprint when it comes to creating value.
Indian Cross-Border Transactions: 2000-2013
In an article published in India's VCCircle on June 7th, Gaurav Sharma, Senior Vice President and Managing Director of the India Practice of martinwolf, wrote, "In the new search for value creation, Indian IT Services companies must acquire high-end services capabilities and continue to move up the value-chain."
Gaurav presents data that shows the number of Indian IT Services cross-border transactions over a 12-year period and juxtaposes it with the plateauing EV/EBITDA numbers over the past 5 years. According to Gaurav, together these data points demonstrate a need for alternative sources of value that could come from a shift in acquisition priorities.
Gaurav concludes that over the next 12 to 24 months, the drive for cross-border M&A will cause Indian IT firms to embrace a wide variety of technologies, "including technology enabled non-voice BPO, analytics and enterprise mobile solutions companies," creating new opportunities to add value.
For more of Gaurav's insights into the changing nature of cross-border M&A activity, read his article in VCCircle.