• Higher Margins, Higher Priority: As we are seeing with many companies in this space such as Camelot and iSoftstone, changing market demand is forcing a transition toward higher margin consulting. Partnering with a private equity firm enables Pactera and similar companies to undergo this transition away from public scrutiny, without having to produce quarterly reports.
• Follow the Leader: While not as large as their Indian competitors, Pactera and iSoftstone are major players in the Chinese IT space - and we expect their smaller competitors to undergo similar strategies.
• Prime Time: Chinese companies are valued lower in U.S. markets than they are in Chinese markets due to lingering suspicions over accounting practices, furthering the case for privatization as an increasingly attractive option for growth and value creation. This is especially true for companies that used reverse takeovers to enter the U.S. market and have been overwhelmed by the compliance costs associated with a U.S. listing.
• Next Steps: We believe that Pactera's managers and their new private equity partners will actively pursue acquisition opportunities to increase their scale and more effectively compete on the global stage. Once this is accomplished, we expect them to re-list and provide a new option for investors looking to buy into the sector.

For more information, read the press release here.

 martinwolf was not the advisor in this transaction.