Why did Wipro Ltd buy UK-based Capco in a $1.45-bn deal?

3 min read | March 05, 2021 08:38 PM AEDT | By Abhijeet

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Why did Wipro Ltd buy UK-based Capco in a $1.45-bn deal?

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Summary

Wipro Ltd has said it has acquired UK-based management and technology consultancy firm Capco in a deal worth $1.45 billion.

Capco is expected to help Wipro scale up its business activities and add $700 million.

Wipro Ltd announced on Thursday that it would acquire the UK-based management and technology consultancy firm Capco for $1.45 billion, making it the biggest acquisition in the company’s history.

Capco, which offers digital, consulting and technology services to financial firms across the globe, is being acquired in an all-cash deal. The deal is expected to seal by June, depending on regulatory clearances from anti-trust bodies of the US, Germany, Canada, Brazil, and Austria.

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The acquisition of Capco would be Wipro’s fourth since July last year after Thierry Delaporte became the CEO of the company. The buyout would be funded by both internal cash and debt. The acquisition would bring in 5,000 consultants spread across locations in the world. Wipro’s chairman Rishad Premji said the acquisition makes Wipro bolder with a better risk-taking appetite and would help in building a better future for the company. Delaporte said that the acquisition would help Wipro to join a group of service providers who offer an integrated digital solution to customers.

He also said that Capco is expected to help Wipro scale up its business activities and add $700 million. About 51 per cent of Capco’s revenues come from banking and payments, and 34 per cent from the capital markets. It has its footprint in US, UK, France, Germany, Poland, Slovakia, Austria, Poland, Switzerland, Brazil, India, Singapore, Malaysia, and Hong Kong.

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The deal would help Wipro in boosting its revenue from banking, financial services, and insurance by almost $3.2 billion, up from $2.5 billion. Capco CEO Lance Levy said that both the companies together would offer transformational, complete solutions driven by innovative technology to provide better financial services.

The biggest acquisition by any IT company so far has been HCL Technologies’ deal worth $1.8 billion to buy several IBM software products in 2019.

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Experts have said that Wipro has been hungry about acquisitions since its inception but has not been able to manage them properly and have found it difficult to find the value out of them. But this acquisition might come as an interesting one as the others were asset heavy.

In the FY2020, Wipro’s profits were $1.3 billion, and revenues were worth $8.1 billion. It had cash reserves of $5.2 billion in December last year.

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