Wipro to acquire ER&D firm Harman Connected Services for $375 million

Wipro

Wipro will acquire a 100 percent shareholding in Harman Connected Services Inc (DTS) and its subsidiaries, along with certain other assets, from Harman International Industries for up to $375 million, the Bengaluru-based IT company said on August 21.

The all-cash transaction is expected to close by December 31, subject to antitrust clearances in the US and other regulatory approvals.

"The acquisition expands Wipro’s ER&D service offerings and capabilities by enhancing its AI-powered digital engineering and device engineering, including design-to-manufacturing across technology, industrial, aerospace, healthcare, and consumer industries," the company said in a release.

Harman Connected, headquartered in Connecticut, USA, is a global provider of engineering R&D (ER&D) and IT services with more than 5,600 employees in 14 countries, including India, the US, South Korea, the UK, Poland, and Germany.

The company reported revenues of $315 million in 2022, $308.2 million in 2023, and $314.5 million in 2024, with services accounting for about 85 percent of its 2024 revenues.

Wipro said by combining Harman Connected's personalised, high-touch delivery model with its global scale and technology ecosystem, the company expects to offer clients “the agility and precision of a specialist provider and the reach and capabilities of a global leader".

Also, read: How India's ER&D sector overtook BPM in the tech industry for the first time

This deal marks another consolidation move in the digital engineering and ER&D services space.

Analysts believe the inorganic strategy by IT companies highlights a broader industry trend where IT firms might leverage the merger and acquisition (M&A) route to counter sluggish organic expansion.

So far, Infosys has acquired two companies to strengthen its offerings in ER&D services by 2024 while HCLTech bought an automotive engineering services provider in 2023. HCLTech will establish a dedicated ER&D services centre to serve Olympus Corp.

Traditionally, ER&D services are largely provided by domain specialists such as L&T Technology Services, Cyient, Tata Elxsi, and others. However, with ER&D spending gathering pace over the last two years, IT services companies are increasingly looking to tap into this new growth area.

Teaneck-headquartered IT firm Cognizant has acquired ER&D companies Belcan and Thirdera, which has boosted its revenue in the past couple of quarters.

Also, read: Cognizant’s acquisition playbook: What it means for Indian IT firms

Moreover, many mid-tier pure-play ER&D are outperforming IT companies in most metrics, including revenue, at a time when the industry is facing sluggish growth due to a slew of factors such as macroeconomic challenges, multiple tariff impositions, and disruptive technologies.

Also, read: ER&D to grow ahead of IT on the back of automation, compute power, supply chain, says L&T Tech CEO Chadha

Interestingly, the rapid growth in the sector has had the government sit up and take notice. As per the economic survey of 2024, ER&D Global Capability Centres (GCC) have grown by over 30 percent to about $25 billion in the FY23.

In comparison, the traditional IT and business process management (BPM) sectors grew faster in percentage terms but on a smaller base. GCCs within the IT segment grew by 30 percent to $9.7 billion, while the BPM segment grew about 27 percent to $10.7 billion in FY23.

Also, read: Revenue of ER&D GCCs grows over 30% to $25 billion in India, shows Economic Survey