“Tech Mahindra is a global systems integrator and business transformation consulting firm focused on the communications industry. With the convergence of media and telecom, the changing landscape of the telecom industry is becoming extremely competitive. As companies rapidly strive to gain a competitive advantage, Tech Mahindra helps companies innovate and transform by leveraging its unique insights, differentiated services and flexible partnering models. This has helped our customers reduce operating costs and generate new revenue streams…”

“For over two decades, Tech Mahindra has been the chosen transformation partner for wireline, wireless and broadband operators in Europe, Asia-Pacific and North America. Majority owned by Mahindra & Mahindra, one of the Top 10 industrial houses in India, in partnership with British Telecommunications plc (BT), world’s leading communications service provider, Tech Mahindra has grown rapidly to become the 6th largest software exporter in India (NASSCOM 2007) and the second largest telecom software provider from India (Voice & Data 2007).”

“Over 23,000 professionals service clients across the telecom eco-system, from our global network of development centres and sales offices across Americas, Europe, Middle-east, Africa and Asia-Pacific.”

Related: Mahindra & Mahindra Limited – http://en.wikipedia.org/wiki/Mahindra_%26_Mahindra_Limited

When the bidding for Satyam began, IBM, L&T, Cognizant, Wilbur Ross, iGate, KKR, Spice, Apax, and many other international IT companies and Private Equity firms were in the race to acquire the company. Due diligence is said to have suggested that Satyam is booking $1.5 to $1.7 Billion USD in BPO sales per year. L&T had already acquired a 12-13% stake of Satyam shares on the open market when the company was at ts low point. After Tech Mahindra won the bid, L&T praised the company and suggested they would do great work to build value at Satyam.

Late speculation had really focused on Cognizant, due the the fact that Satyam was one of the original founders of Cognizant itself. In the end, what can be regarded as the smallest company of the bunch won the race.

“They (Tech Mahindra) have emerged as the clear winner. They had bid at 58 rupees ($1.16) per share,” one of them told Dow Jones Newswires. The next bidder was Larsen & Toubro Ltd. at 49.50 rupees, the person added.

To date, Tech Mahindra has been exclusively providing IT services to the telecom sector. Their outreach, employee numbers, current accounts, and worldwide presence is expanded in a massive way with little to no overlap with existing business. The main question appears to be whether they can calm the worries of Satyam clients over account security in the long & short term.

Kiran Karnik, Chairman of the Satyam Board of Directors, stated:

“On behalf of all Satyamites and their families, we congratulate Tech Mahindra on being the highest bidder. The selection of the highest bidder, in a fair, open, and transparent process, signals a new stage for the Company in its progress towards stabilization and growth. We hope this will infuse greater confidence and comfort amongst customers, who will continue to be happy with Satyam’s excellent service delivery. This event ought to dispel the anxiety of all stakeholder as it re-positions the Company’s commitment to revival and good governance.”

Satyam has a large number of assets in India including office space, industrial parks, intellectual property, and technology. With the state of the accounting and the complexity of the ownership relations surrounding the assets, it is probably necessary for an Indian based company to take over at this time. Like Satyam, Tech Mahindra has a worldwide presence already – main offices in the Gulf, Singapore, EU, USA, AU, etc. as well as a strong base in SAP outsourcing ( http://www.techmahindra.com/capabilities/sapCapabilities.aspx ). Since SAP is one of the areas Satyam is known best for internationally, this should be a strong synergy in a dynamically expanding sector.

The board overseeing the bidding process stated at one point that “things other” than only financial would be given consideration when selecting the winning bid, but there is no explanation as to why the other companies failed to bid higher. Tech Mahindra is reported to have the majority of the sum needed for the sale on hand as cash and would take over Satyam by weeks end. The first impression one has of the company when visiting their website, is that they are “employee-centric”:

http://www.techmahindra.com/index.aspx

Few other corporate websites I have visited show the children of employees around the world as “ambassadors of their brand,” but it seems to be a nice touch. Many people were hoping that the company to acquire Satyam would protect the employees there, the government required certain non-dismissal of employee and non-sale of assets requirements to the acquiring company for a period of three years. But it looks like Tech Mahindra is quite family oriented, and have no need to dismiss any of Satyam’s current employees.

If Tech Mahindra can manage this in the right way, they can build one of the most powerful and dynamic software & BPO companies in India over the next 10-20 years. Nevertheless, Satyam as an entity may in fact vanish soon, if TM decides to merge the company officially.

Reference:

http://uk.reuters.com/article/companyNews/idUKBOM47614620090413

http://www.bloomberg.com/apps/news?pid=20601091&sid=aZiAt5whvGVk&refer=india

http://en.wikipedia.org/wiki/Tech_Mahindra

http://news.bbc.co.uk/2/hi/business/7996459.stm

This is a post from Web Dev News, a site brought to you by Xavisys Web Development.

Official – Tech Mahindra wins bid for BPO Pioneer Satyam

Yet, some are saying IBM doesn’t need Satyam with its 50,000 employees and IT staff that form the outsourcing backbone of the majority of the world’s Fortune 500 companies. IBM already has around the same number of employees in India currently, making it with Infosys, Wipro, TCS, Cognizant, and Satyam one of the top IT outsourcing service providers in the country. Analysts say Satyam’s potential liabilities, from a class action shareholder suit against Raju for destroying stock value and a lawsuit by Upaid for fraud / copyright issues could be problematic, to the tune of over $100 Million in liabilities. Bidders for the company have been unable to review the full accounts of Satyam, as the investigation into the accounting fraud is still ongoing. Clients have canceled accounts with Satyam, and the company has taken a bridge loan to cover operational costs until a new buyer is found. What advantage to IBM, then, in purchasing the company with so many problems?

Return then to the bidding process. Currently, 51% of Satyam is being sold by the government. A list of bidders who have confirmed requirements includes 8 companies, some of which have been mentioned at various times during the process as:

1. Larson & Toubro – Indian Engineering Firm
2. Tech Mahindra – IT Branch of Indian Conglomerate
3. Spice Group – Now Withdrawn from Bidding
4. Wilbur Ross – Distressed Assets, Venture Capitalist
5. IBM – or their proxy
6. HP – very little on this possibility published
7. Cognizant – Reportedly withdrawn
8. KKR – PE firm, May be in or outsourced

Again, there may be another private equity firm or multinational IT company involved but not publicly confirmed, some of the names listed above may not be included. The front-runner is considered L&T, whose founder has already acquired around 12% of the company. IBM is reportedly purchasing Sun Microsystems at what may be considered an incredible price – a former $200 Billion USD company at a fraction of its value. Even so, the purchase price was double Sun’s market value at the time of the announcement. Would a 100,000 strong outsourcing team in India, combining IBM Global and Satyam be a powerful backend for a fused IBM-Sun conglomerate? The fact is Satyam has one of the best client portfolios in the world, and the company has IT service contracts with Fortune 500 companies that could add $1 – $2 Billion USD in yearly income to the company that acquires it at current value. Companies generally sell between 10 and 20 times average yearly receipts, but since Satyam’s books are scrambled, nobody knows for sure what that value is.

Satyam needs a strong buyer with unparalleled corporate governance, openness, and transparency. They need a company that instills confidence in their client base and brings in new accounts. The Satyam staff or employee base are recognized as being some of the most talented in the world – before the Ramaling Raju revelation, there were really few companies with the international reputation of Satyam, in a very good way. Satyam essentially invented IT outsourcing or BPO, industries that have created a development revolution around the world, and trillions of dollars in business. This is the main point – more than being an Enron or Ponzi scheme, Satyam was one of the best and most innovative companies in the world over the last 25 years, and their employees are among the most talented and respected in the field. In 2006, IBM considered a takeover of the company at its heights – and at a market cap over 10 times current values.

So there is a bond and a perfect synergy between Satyam and IBM, the main issues being former management (already removed). But L&T has to be seen as the front runner and favorite in the bidding. Unless one of the PE firms makes a surprisingly high offer and outbids them, or IBM seriously pursues Satyam (something most market analysts are suggesting they are not doing), or another wildcard emerges, L&T will probably win the bidding. A bid by HP aimed at fusing their work with Mphasis and Satyam into a large outsourcing service provider based in India would be an exciting development, but nothing suggests anything like this is brewing.

Taking a Wilbur Ross model, imagine a PE firm buying Satyam – required by law to hold the company for three years, selectively acquiring other international outsourcing and BPO companies, merging the companies together, building up a massive IT service providing company, selling it off when the market recovers – similar to what he has done in steel and coal. The fact is that no one can really compete with Indian BPO at this point and it is going to grow continually based on cost / quality factors over the next 10 years, and no one really does that better than Satyam traditionally. There is massive potential here and the base is strong.

Whatever the motivations, potential benefits and unknowns, the process looks to be resolved quickly – reports suggest the sale will be announced within 2 weeks. We can hope the best for Satyam and its employees, and hopefully the company’s recovery will be symbolic of the overall greater recovery of the economic situation globally.

This is a post from Web Dev News, a site brought to you by Xavisys Web Development.

Prospective Satyam Bidders May Include IBM – L&T, Tech Mahindra Confirmed