While Indian information technology companies are looking at the US and Europe for acquisitions, IT giant IBM is gearing up a mergers and acquisitions strategy in growing markets like India, China, Latin America and other regions.
With over 70 acquisitions since 1995, IBM is not new to this. Matthew Friedman, its vice-president, M&A and Business Development, Growth Markets, spoke with Shivani Shinde on why the 'Big Blue' is doing so and what it is targeting. Excerpts:
What's IBM's thinking behind exploring acquisitions in India?
India is a very important and significant market for IBM. Growth markets such as India and China are growing significantly faster than other geographies. Take, for instance, China. The country has announced the building of over 70 nuclear power plants.
Similarly, India plans to build close to 14 nuclear power plants. We see huge opportunity here, in terms of providing technology solutions. Our acquisition strategy is to fill the gaps that we might have (in) serving a region or clients. We look at the markets first and see what assets from a technology perspective do they need, and if we see gaps in the providing of these services, we start looking at companies that seem to fill this gap and create value.
So, what opportunities do you see in this country?
My role, which was newly created, was to accelerate the development of these markets - whether by developing new solutions or acquiring new targets. If you look at the software market, the middleware market in India is growing at 10-11 per cent on an average.
Segments like business analytics, business intelligence, performance management, and predictive analytics are growing at over 30 per cent. We are seeing that clients value such services. We are very focused on driving growth in these markets.
Will you only look at product firms or services ones as well?
My role looks at both services, systems and products offering. We look at services in two ways. One is like the recent RedPill acquisition (based in Singapore, with significant presence in India) that offers customer analytics as a service.
The others are like services providers. In that segment, we believe in taking the acquired assets that we have, like Cognos or others, into a services model. Services acquisitions are important, but they are not as easy as software acquisition. Part of it is because software is not as capital-intensive.
In many cases, we leverage our footprint, as we have the largest services in world. Our services revenue is more than $50 billion. We are already looking at opportunities in India, China, Latin America and Eastern Europe.
How many targets are you focusing on currently?
We do not talk about numbers. But as you know, we have significant cash position and there are lots of opportunity. IBM has $11 billion in cash. We have enough opportunity with venture capitalist community. Honestly, a lot of opportunity we see is in the software area and software capabilities and service business model like managed business processes, asset management, business analytics, etc. Some of these we are looking at expanding in India.
After Daksh, IBM has not made any major acquisitions in India.
We have been fairly active. We have acquired firms that have significant presence in India. We make all acquisitions to fill gaps in our portfolio for clients or make acquisitions that have potential to grow rapidly and focus on markets and countries that grow more than the average rate.
RedPill Solutions is an apt example. Some of the others are Webify Solution or Telelogic. All these firms had a presence in India and had technologies that could address the Indian clients' issues.
