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Tech Mahindra to swallow Satyam in BILLION dollar deal

Indian outsourcers can't get enough of each other

Internet Security Threat Report 2014

The wonderful world of outsourcing is about to get a little bit smaller after Indian tech giants Tech Mahindra and Mahindra Satyam announced their intention to merge, creating India’s fifth-largest IT and outsourcing group by revenues.

In reality it is Tech Mahindra in the driving seat, as the outsourcing giant bought a controlling stake in Satyam in 2009 after the firm became embroiled in one of India’s biggest ever corporate scandals.

The $1bn (£630m) merger will give birth to a company with revenues of around $2.4bn (£1.5bn), a workforce of approximately 75,000 and over 350 clients across 54 countries, according to the firms.

However, Ovum analyst Ed Thomas warned that the saga is far from over.

“It will take the rest of the year for the merger process to be concluded and no name for the combined entity has yet been announced,” he said.

“On this latter point, it will be interesting to see if the Mahindra Group, which will own over one quarter of the new operation, decides to finally rid itself of the Satyam brand, which was badly tarnished by the accounting scandal that came to light in 2008.”

That scandal emerged when Satyam founder B Ramalinga Raju admitted he had been inflating profits at the firm by almost a billion pounds over several years.

The government was ultimately forced to step in and the company was offloaded to rival Tech Mahindra.

BT of course owns about a quarter of Tech Mahindra as it founded the firm in the mid 80s as a joint venture, so will get its mitts on 12.8 per cent of the new entity.

Unsurprisingly gushing statements from both sides of the table pointed to an “important new chapter” in the history of both firms.

"This merger will help propel the combined entity into the top tier of Indian software and services companies, achieving the [Mahindra] Group's key objective of being in a leadership role in each of our focus business areas," said Tech Mahindra chairman Anand Mahindra. ®

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