Tech Mahindra buys UK's BIO Agency in all-cash deal

Throwing more light on the deal, Indraneel Ganguli, Senior VP & Global Head Brand, Tech Mahindra said the aquisition is a strategic fit that will augment the digital porfolio of the company. Mergers and acquistions remains a critical part of the company's strategy, he says.The acquisition will help open up more clients for BIO globally, mainly in Europe and US and help scale their offerings. It will help them make sizeable inroads into The Fortune 100/500 clients of Tech Mahindra, says Ganguli. BIO, currently has strong presence in UK with 25-30 strong clients, he adds.As a strategy, Tech Mah is always open to acquisitions that make a strategic fit, says Ganguli.Below is the verbatim transcript of Indraneel Ganguli's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18. Latha: You have told us its 12.5 million pound revenue for the latest year and you are paying 40 million pounds for that acquisition plus 5 million, so 45 million. Can you tell us what it will bring in terms of earnings and EBITDA to your company? A: It is little early for me to comment on that but I can only assure you that this acquisition is very well thought through and it is extremely strategic for us because this augments our digital portfolio and as our CEO also has very recently stated that merger and acquisition (M&A) is critical part of our strategy and this is from the shareholder and the board of direction perspective, who encouraged us to look at mergers and acquisitions. However, we feel that this is an extremely strategic fit because it enables our journey from digital scale to digital experience. So if I look at the recent acquisitions, if you look at Pininfarina; we went in the area of design. When you look at Target, we went in the area of platforms and now with Bio we are getting into the area of digital experience. Sonia: When you say it augments your digital portfolio, can you tell us what kind of synergies it will open up for you geographically? Where are they present and how much could you grow? A: The Company is currently present and extremely strong in the UK and they are looking at scaling their offerings and proprietary thinking across Europe and US and that's exactly where the strategic fit lies because for Tech Mahindra, which has embraced the future and focus on digital - this will further strengthen and enable us to engage with our clients at the start of the journey and the start of the journey is important and perhaps what is more important is it helps to design the customer experience. However, from BIO Agency's perspective, this acquisition will open up more clients for them globally, scaling their offerings and offering new services with a deeper digital change and that is where they are good at and this will significantly help offering both in terms of people turnover and market impact and continue to invest into their people and proprietary thinking. Latha: Can you give us some idea of the EBITDA it brings to the table on a historical basis and if you have some idea of what synergy gains that you are expecting. I know it is more qualitative but nevertheless how earnings per share (EPS) accretive can this be? A: I will not be able to offer any forward looking statement at this stage but all I can tell you is that with a revenue base of 12.5 million for FY16 and this synergy, it will obviously have an exponential growth for us across the world. So that is what I can tell you at this stage.Sonia: What about the number of clients. How many clients does this company have currently and what does the growth look like?

A: This Company has 25-30 very strong clients and they are clients with deep relationships. So with this what will happen is that they will have two way street opening up for both Tech Mahindra to engage with them as well as their entry into the Fortune 100 and 500 customers of Tech Mahindra.

Sonia: Your own digital portfolio, the Tech M's digital portfolio - can you give us a sense of how much it could grow over the next one-two years and how much is it contributing in terms of percentage of business?

A: We are close to our Q1 results, so it is difficult for me to offer you that statement at this stage.

Latha: Avoid the forward looking. At the moment what is the digital piece in Tech Mahindra?

A: It is substantial and instep with our strategy. This move is going to augment it exponential?

Latha: Can you tell us whether we should expect more acquisitions. This has been your strategy, your string of pearls strategy. Should we expect more before 2016 is out?

A: Yes, of course, if it makes business sense for us, definitely and for sure because it is a stated fact that M&A is a critical part of our strategy and our focus is towards digital technology and towards products as a service, software as a service, design as a service and we will continue to expand in inorganic way. 

Sonia: We read from the press release that the company has revenues of 12.5 million pounds but we do not see the EBITDA or the EPS anywhere. Is this an EPS accretive acquisition and is this a profit making company?

A: Of course it's a profit making company and a huge profit making company. We will come to you with further details once we conclude the entire transaction and that should be done by July.