HCL Axon, a division of HCL Technologies, on Friday announced the takeover of the SAP practice of South Africa-based UCS Group for a total consideration of up to $18.5 million over a two-year period.
This includes an upfront cash payment of $7.7 million as well as a growth-linked earn-out clause, implying that the balance payout would be linked to achievement of growth targets over the two-year timeframe.
Good fit
This is the first acquisition by the unit after HCL bought Axon in December 2008.
Given its thrust on the retail space, HCL expects the latest takeover to enhance its capabilities with SAP Retail Industry Solutions (IS), bring competence in IS retail and enhance the global delivery capabilities, particularly market presence in South Africa.
The acquired practice, which is an arm of UCS Solutions, offers Tier-1 Retail and wholesale SAP project implementations, and employs 67 professionals.
Clients, revenues
The SAP practice counts six of the large retail sector companies in South Africa as its clients and its base revenue is seen at $8.75 million in South Africa, Mr Ram Krishna, Corporate Vice-President and Head of Enterprise Application Services, HCL Technologies, told reporters in a conference call.
“The carve-out entails customers, pre-configured solutions and people,” he said, adding that the acquisition would be funded from internal accruals and free cash.
EPS dilution minimal
He further pointed out that the EPS dilution for HCL Technologies would be minimal as the transaction is small compared to the current business of HCL.
The effective date of this transaction is August 1, 2009 after fulfilment of conditions precedent to this transaction.
In a statement issued here, Mr Steve Cardell, President, HCL Axon, said, “We have identified the retail market as a major opportunity. Completing this partnership accelerates our ability to offer the market a combination of extensive SAP IS retail capability and track record, which coupled with our own retail experience, creates a compelling customer proposition.”
In December, 2008 HCL had announced the completion of the £440-million buyout of the UK-based Axon Group, marking one of the largest acquisitions in the Indian IT space.
HCL merged Axon with its own SAP practice, and named the merged division HCL Axon. The division had 4,500 consultants. The move gave an immediate fillip to the Noida headquartered company — for the quarter ended March 2009; HCL’s revenue got a leg-up from the acquisition of Axon.
HCL Tech’s revenue rose 49.4 per cent year-on-year, and 15.9 per cent sequentially, to Rs 2,861.5 crore in the third quarter.
