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Wednesday, January 25, 2006

EDS may buy MphasiS

(Via Economictimes) In what may be seen as the second largest deal in the local software services sector, slightly smaller than the $593m Oracle paid to acquire Citigroup’s stake in banking product company iFlex, it appears that EDS may buy out Mphasis. The total acquisition cost may be around 1600 crores. It is said that EDS is likely to not only buy Baring’s stake, but also Jerry Rao’s (MphasiS’ chairman) stake. Jerry Rao is also the current chairman of Nasscom (Correction : Jerry Rao was the chairman of Nasscom till last year. For those who may not know this - N.R.Narayanamurthy of Infosys is his maternal uncle as well.). The speculation is that the discussion between EDS and MphasiS is also intended to determine how the senior management, including the founders of MphasiS, will be absorbed in EDS. Jerry Rao, the former Citibanker-turned-entrepreneur who set up the company, is expected to head the global financial services practice of EDS post merger. Currently, Jean-Louis Bravard leads EDS’ global financial services. The rationale for the acquisition is that EDS wants to ramp up its financial services practice to compete head on with IBM Global Services. EDS has been working on strengthening this practice for the last three years. IBM’s acquisition of PwC has helped it to steal a march in this domain. Now, EDS is trying to bridge that gap by acquiring MphasiS.While both EDS & Mphasis have not confirmed or denied, am not too sure of how much value would accrue to EDS by this acquisition - atleast for two reasons - key people are said to be moving out/already moved out and the valuation might be seen to be a little high.. This may also mean that more offshore companies with annual turnover less than 200 million may choose to sellout.

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