Co Led By Lankan Founders May Pip Fiserv, Genpact & Tech Mahindra
Nasdaq-listed Virtusa Corporation, co-founded by Sri Lankan tech entrepreneurs, is discussing a potential acquisition of Chennai-based Polaris Consulting & Services (formerly Polaris Financial Technology) in a deal valued at $350 million (Rs 2310 crore), people familiar with the matter said.
The Massachusetts-headquartered IT company's M&A talks with Polaris is seen as a move to strengthen its offerings and get access to new clients in banking and financial services. Polaris, being advised by Credit Suisse, could soon reach a decision on the acquirer as negotiations were fairly advanced, one of the sources added.
US based financial servi ces technology provider Fiserv, Genpact, Tech Mahindra are among other possible suitors. Arun Jain-spearheaded Polaris has been an active M&A target for more than two years in the wake of a restructuring, which spun off mature services business into a separate listed entity.Jain, who controls 29% stake, remains as chairman and mentor of the services unit after relinquishing executive role last year to focus more on software products business. Rohatyn Group (formerly Citigroup Venture Capital International) owns 19% stake and will offload shares along with promoter block. Investor Rakesh Jhunjhunwala has built up 4.8% stake, which is crucial for any acquirer to control majority shares. Emailed queries and phone calls to Polaris spokespersons remained unanswered since Friday .Virtusa too didn't respond to queries about its interest in Polaris.
Analysts said Polaris, which counts Citigroup as top client, could find a potential suitor in Virtusa with strong footprint in consumer banking, treasury and capital markets. Co-founded by Sri Lankan Kris and Tushara Canekeratne, Virtusa also services top clients across insurance, communications, healthcare, life sciences and media sectors.
Peter Bendor Samuel, CEO of US-based Everest Group said, Virtusa wants scale and access to a new client base. “They have a demonstrated ability to grow services, have a young ag gressive talent base and should be able to revitalize a somewhat tired and dispirited business. It's also good timing for Polaris as valuations for this are high.“
Virtusa -with JP Morgan Chase, British Telecommunications and AIG Global Services as major clients -clocked $479 million in revenues last fiscal and is sitting on $180 million of cash on its balance sheet.
Hansa Iyengar, analyst in London-based IT research firm Ovum, said the likely acquisition could be a big deal for Virtusa, as it will bring in much-needed skills around digitalization of the customer facing interfaces in the financial services industry. “Polaris has the potential to fill gaps in Virtusa's portfolio and position itself as an end-to-end digital transformation partner,“ she said.
