Wipro to buy Capco for US$ 1.45 billion; biggest buyout to become ''bolder'' company

Wipro, the Indian IT major announced to acquire Capco, a company based in London over a US$ 1.45 billion (> Rs. 10,500 crore) deal and become a "bolder and ambitious" firm and rake in bigger revenues from banking and financial services sector.

The acquisition will provide Wipro with 30 large new client from banking and financial sector and strengthen its position in the Banking, Financial Services and Insurance (BFSI) sector.

Wipro Chairman Mr. Rishad Premji stated that Wipro has made a significant announcement about a transformational acquisition, the biggest in the company's history. Capco will be acquired by us for US$ 1.45 billion. Capco will give us over US$ 700 million in sales as well as over 5,000 consulting and domain experts based all over the world. Wipro will join a select group of service providers that offer an integrated and end-to-end solution as a result of this acquisition.

He said, “Banking and financial services is our largest field worldwide, as well as a high priority and growth market for us. Capco will bring substantial scale to our BFSI market, as well as a strong product collection of service offerings, combining consulting and database expertise with scale, digital technology, and operations to develop a distinctive combination of consulting and database expertise with scale, modern technology, and operations. We anticipate that this would result in faster development.”

In December 2020 quarter, the BFSI segment accounted for > 30% of Wipro's IT services revenue at US$ 2,071 million.

Mr. Premji said, “Wipro's reach will be expanded into a collection of strategic planning accounts that are specifically complementary to the company's clientele, as well as providing a forum to leverage Capco's strong connections with CXOs and business leaders of many large customers over the years.”

Wipro CEO Mr. Thierry Delaporte said, “Acquiring Capco allows us to expand our global financial services sector, which is one of our main divisions, with a broad consultancy presence, from US$ 2.5 billion to US$ 3.2 billion. Our market relevance is bolstered by our scale. The acquisition would also help accelerate growth due to the complementary consumer profiles of Capco and Wipro's BFSI businesses, as well as solution synergy.”

Capco CEO Mr. Lance Levy stated that to establish a new winning partner for the financial services sector, the companies will deliver customised transformational end-to-end solutions, all fuelled by advanced technology at scale.

He said, “We are excited to combine our complementary strengths and cultures to drive market change and provide new opportunities for both our clients and our employees.”

Mr. Delaporte said, “We will provide an integrated plan and implementation approach for common clients to ensure that we maximize relationships, skills, and capabilities, and learn together while working in the model."

He also stated that the acquisition would affect Wipro's IT services margin by 2% in FY22, with a non-cash charge accounting for a large portion of the effect.

Customers will gain from a combination of Wipro's strategic architecture, business and consulting, digital transformation, cloud, cybersecurity, data and IT services and Capco's comprehensive database and consulting expertise across finance, payments, capital markets, insurance, risk and regulatory offerings.

Capco, established in 1998, has over 100 clients and several partnerships with the world's leading financial institutions. It employs > 5,000 consultants in > 30 locations around the world, spanning 16 countries. For the fiscal year ending in December 2020, the company's consolidated revenues stood at US$ 720 million.

According to the filing, the transaction will require antitrust approvals under US, German, Canadian, Brazil, and Austria, as well as other regulatory approvals.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.