US-based IT firm Syntel acquired for $3.6 billion by Atos

US-based IT consulting firm Syntel has been acquired by French IT consulting giant Atos. The move greatly expands Atos’ capabilities in the North American market, and sees 23,000 global Syntel staff swell the firm’s ranks.

Founded in Troy, Michigan in 1980 by Bharat Desai and Neerja Sethi, Syntel (then named Systems International) started out providing software staffing support to local auto firms and businesses. The IT firm grew with the development of a huge offshoring services model based in India, with its first two ‘Global Development Centers’ opened in Mumbai and Chennai back in 1992. Today Syntel has 23,000 employees based in 30 countries, with 18,000 staff based out of India. However, 89% of the firm’s almost $1 billion in 2017 revenues was generated in the North American market.

Syntel is a leading global IT consulting firm, with a strong track record across the various areas of technology consulting and services. The firm has particular strength in the areas of automation, data science, cloud, and mobile.

Now, the firm has been acquired by France-based IT consulting giant Atos. In a deal worth about $3.6 billion, Atos will acquire all outstanding Syntel shares at $41.00 per share, as well as its net debt.

"This is a very exciting development for Syntel,” said founder and co-chairman Bharat Desai. “The Syntel board is committed to maximizing shareholder value and believes that the agreement with Atos achieves that objective and delivers a win-win proposition to our customers and employees.”

The deal will help Atos reinforce and expand certain IT service areas, while strengthening its penetration into the lucrative North American IT market. “The two organizations are fully complementary in their customer base, geographies, and services,” commented Atos Chairman and CEO Thierry Breton. Particular client industry areas that will be fortified the most from the union are banking and financial services, healthcare, retail, logistics, manufacturing, and insurance.

The deal also helps France-based Atos grow in North America. Though it has a leading position in Europe, the firm has been trailing somewhat in the US. As such, the firm has been working to bolster its presence in America with M&A – acquiring Xerox ITO in 2014 for $20 million, as well as three US healthcare consulting firms in 2017.

“Syntel will significantly enhance our presence in North America and accelerate the digital transformation of Atos’s customers,” added Breton. “It represents a transformational step for our Business & Platform Solutions Division, as it will significantly enhance our growth and profitability profile through an extended digital services offering, cutting-edge India-based delivery platforms, as well as revenue and cost synergies.”

The above-mentioned synergies are estimated to be significant. The larger customer base will offer cross-selling opportunities, with revenue synergies expected to reach $250 million by 2021. Operational improvement on both sides as a result of the acquisition is projected to generate a cost benefit of $120 million annually by 2021.

The acquisition will see Syntel CEO Rakesh Khanna join Atos’ Executive Committee, while other Syntel executives and management are expected to join Atos leadership teams in the 73 countries in which the acquiring firm operates.

The transaction was financed by debt fully underwritten by banks BNP Paribas and J.P. Morgan. Atos had revenues of almost €13 billion last year, and total equity of €5.22 billion. As of 2017, the IT giant had 97,000 employees.