Mumbai, Feb. 15: Mahindra Satyam, the Rs 6,354-crore software services unit within the Mahindra group, has acquired a 51 per cent stake in Brazil’s Complex IT.
Complex IT is a provider of consultancy services on the use of SAP AG’s business management software.
Mahindra Satyam paid $6.5 million initially and expects to stump up $20- $23 million within the next 18-24 months with the payments linked to the achievement of certain pre-agreed milestones.
The company has the option of purchasing the remaining 49 per cent as well.
Mahindra Satyam is a subsidiary of Tech Mahindra. Both the companies will work as one entity in Brazil, Manoj Bhat, Tech Mahindra’s senior vice-president and head of corporate planning and mergers & acquisitions, said on the sidelines of the Nasscom summit.
Complex IT brings 500 staff, customers such as C. Vale Cooperativa Agroindustrial, and annual revenues of about $50 million to Satyam. It also opens up access to the $36-billion Brazilian IT services market.
The acquisition will focus on developing solutions for the rapidly-expanding enterprise solutions market in the South American country.
Brazil is the second-fastest growing geography globally for SAP. Software revenues for SAP grew 20 per cent last year. Revenue from SAP stands at $1 billion. The current spend on IT by firms in Brazil is around $ 70 billion with $36 billion being spent on services and software. Of this, SAP revenue stands at $1 billion.
“Our portion in revenue is 5 per cent of this. We want to double it and it will take 5-6 years to achieve the target if the company grows at 30 per cent, which is our target. This joint venture, therefore, will help us grow faster,” Complex chairman and CEO Antonio Rossi said.
Bhat said Mahindra Satyam and Complex would go to market with proprietary solutions for large manufacturing, financial and consumer services companies.
“The way we have structured the deal we will have to pay around six times EBITDA (earnings before interest tax depreciation and amortisation) valuation of Complex,” he added.
Tech Mahindra is looking to make acquisitions to add capabilities and customers as it plans to double its revenue to about $5 billion by 2015.
The company has acquired businesses such as the back-office unit of Hutchison Whampoa Ltd and Comviva, an Indian provider of software for telecommunications carriers, in the fiscal year that ends March 31.
The company has said it expects to complete merging Satyam with itself in March. The combined company, which is expected to get a brand overhaul soon, is the fifth-largest software services provider in India.
The deal will enable Mahindra Satyam to tap into opportunities arising from the Fifa World Cup in 2014 and the Olympics in 2016 that Brazil will host.