Axon deal to raise our SAP-based solutions abilities: Infy

Infosys has acquired Axon Group, a UK-based company, for £407.1 million. Infosys says the Axon Group deal would be completed by November. The Infosys management said the deal is at 33% premium to the six-month average price of Axon. 

S Gopalakrishnan, CEO, Infosys said that his company's SAP practice has been growing about 65%. "We are seeing continued demand for SAP services and we found the right opportunity and so we made the offer today." 

"Our desire or our aspiration is to become a trusted transformation for our clients. This (deal) allows us to combine the strengths of both the organisations and become a trusted transformation partner using SAP as the underlying platform for making those transformations," Gopalkrishnan added.  

Excerpts from CNBC-TV18’s exclusive interview with S Gopalakrishnan:


Q: There are question marks really on the timing of this acquisition because everyone at this point in time seems to be cutting discretionary spending or at least is going slow on that especially in the Enterprise resource planning (ERP) space. Why the timing? 

 

A: When you look at the SAP practice for Infosys, when you look at the SAP practice for Axon - both of them have been growing and our SAP practice has been growing about 65%. We are seeing continued demand for SAP services and we found the right opportunity and so we are making the offer today. 

 

Q: We have seen the client list that Axon has and an impressive client list at that but outside of that could you take us through the specifics and what really attracted you to Axon? Why the decision to choose Axon over possibly other targets that you might have had on your radar? 

 

A: When we look at a potential acquisition, we want it to be strategic. We want it to enhance our capabilities in a particular service solution etc.

 

So in this case, our desire or our aspiration is to become a trusted transformation for our clients. This allows us to combine the strengths of both the organisations and become a trusted transformation partner using SAP as the underlying platform for making those transformations. That is the reason why this has attracted us.  

 

Q: Dejargonise this transformational business for us? Could you take us through the actual synergies and also what are the gaps that Axon helps Infosys fill?

 

A: It is enhancing our capabilities in SAP-based consulting and implementation solutions. Many companies use SAP, as their core infrastructure in application infrastructure and that is what they leverage for transformation also. So, this allows us to enhance those capabilities, allows us to go after large opportunities, and large deals. It allows us to leverage the client base Axon has and cross-sell various other services. It also enhances our delivery capabilities through the centre in Malaysia. So, there are significant opportunities.

 

Q: Three large shareholders hold about 18% of Axon, rest by financial institutions as well as the public. You have had a conversation with those three large shareholders. Do you expect any kind of resistance or challenges from the rest?

 

A: For that we have to wait and see. The Board has supported it. Citi has recommended large shareholders, including the Management who has supported us, with a hard irrevocable. We now have to wait and go through the process.

 

The plan is that this is a process that is through a Scheme offer, where we have to go through the courts to do that. There is an Extraordinary General Meeting somewhere down the line. That process has to be gone through and we anticipate that this will close by end of November.

 

Q: Speaking of plans, is there also a plan on the cards to actually merge this with Infosys Consulting because Axon is in the consulting space; would it not make strategic sense then to merge the two?

 

A: We have not looked at how this structuring etc. would happen because it is too early. We have to make sure that this offer is expected and taken through. So we will talk about those details probably after the deal closes. 

 

Q: When do you actually see this acquisition kicking in as far as the Infosys balance sheet is concerned and what kind of an impact does it really going to have on your guidance following that?

 

A: Actual numbers - we will have to wait till the deal closes and when we revise guidance etc. What we can clearly talk about today is about the strategic nature of this opportunity.  

 

Q: Give us some sort of a ballpark figure on what you could actually see this do to the balance sheet?

 

A: We have to go through this process. There are strict guidelines on what we can talk about and things like that. We hope over the long-term this will significantly add to our capabilities on large deals, (and enhance) our capabilities to grow the SAP practice and to cross-sell and leverage each other. The synergy we can talk about is all in terms of the strategic intent to be a transformational partner using SAP as the underlying platform.

 

Q: You have got about USD 1 billion in cash post this acquisition now. Is there anything more on the horizon as far as Infosys is concerned?

 

A: No, our focus right now will be to make sure that we close this and we are able to integrate and take this over. If something comes, we will look at it at that point. Right now I cannot comment on this. All I can say is that our principles in terms of what we look for have not changed and that will continue.