On July 22, 2018, Atos formally announced their intent to acquire Syntel in an all cash transaction for $3.4 billion. The news did not come as a surprise, as Atos has been quite vocal on its M&A strategy. Syntel has also been looking to strengthen its position after a disappointing 2017 which saw a 4% reduction in revenues over 2016.

Atos has managed to check all the required boxes with this acquisition, such as access to North American client base, a well-recognized and comprehensive range of digital solutions, as well as a strong offshore base to improve utilization. All indicators on paper point that this could be a marriage made in heaven.

Atos has been growing extensively in last 10 years through both organic and inorganic growth. The revenue has grown more than 2X from € 5.6B in 2008 to € 12.7B in 2017, and the employee base also grew from 51,000 in 2008 to about 97,000 in 2017.

Over this period, Atos has seen a phenomenal 11x increase in market capitalization to € 12.8B. However, Atos’ presence in North America has been limited up until now with only 16% of revenue coming from the geography. With an impressive clientele in Europe – counting Aviva, Henkel, ThyssenKrupp, and Siemens among others as their clients, Atos has been looking to grow inorganically and expand their “Business & Platform Solutions” business for cross selling in North America.

Syntel fits the criteria for Atos perfectly with 90% of their revenues ($924 M in FY2017) from the Northern American region in 2017. It also helps that Syntel has an operating margin of 25% against Atos’ 10.5% - driving the overall margin for new combined entity to nearly 11.5%. Atos will also gain over 23,000 employees of Syntel – expanding the global workforce since 80% of Syntel workforce is based in offshore locations.

Read the full article for further insights into the future regarding this acquisition, including how Syntel clients can expect to be impacted.