In one of the biggest deals in the outsourced product development (OPD) market, audio and infotainment systems maker Harman International Industries will buy Indian-born serial entrepreneur Romesh Wadhwani’s Symphony Teleca for $780 million (about Rs 4,800 crore at Friday’s exchange rate of 61.4).
The only other large deal in this market is the 2013 acquisition of GlobalLogic, founded by four alumni of Indian Institute of Technology, by private equity firm Apax Partners for $420 million.
Headquartered in California, US, but with operations in Bengaluru, Pune, Mumbai and Gurgaon in India, Symphony Teleca (annual revenue of $370 million) is part of Wadhwani’s Symphony Technology Group, a private equity firm that has about a dozen companies with combined revenues of $2.5 billion in its portfolio.
Harman will pay $548 million at the close of the deal - $382 million in cash and $166 million in its stock, according to Symphony Teleca.
The remaining $232 million will be paid in the third quarter of 2016. The transaction is subject to customary closing conditions and regulatory approvals and is expected to be completed by the end of Harman’s 2015 financial year that began in July last year.
Analysts are looking at the acquisition as a shift in the auto-infotainment systems business. Automobile makers are looking at a future of connected vehicles. Harman has also announced the acquisition of Red Bend, an Israel-based developer of cyber security software, for $170 million.
“This acquisition of Red Bend…adds a critical component to our automotive systems and services portfolio that will essentially future-proof software in cars, ultimately making them safer, smarter and more efficient,” Dinesh C Paliwal, chairman, president and chief executive officer, Harman, was quoted as saying in a Red Bend statement.
This is the second biggest sale for Wadhwani.
In 1999, he sold Aspect Development, which he founded and headed, to i2 Technologies for $9.3 billion, one of the largest enterprise software mergers of that time.
The Harman-Symphony deal is also significant because it is one of the biggest deals in the OPD business, prominent players in which include Pune-based Persistent Systems and GlobalLogic.
Though Indian information technology services giants such as Tata Consultancy Services (TCS) and Infosys have entered the OPD market, majority of their revenues come from application development/maintenance. Last year, Symphony Teleca bought Aditi Technologies, which makes systems of engagement (are applications using cloud, mobile and analytics technologies for enterprise purposes such as human resources).
According to Harman, the Symphony acquisition will give it access to platform for integrated services serving converged markets, software engineering and integration services for connected enterprises, and a new revenue stream for the $5.6-billion company, half of which comes from providing navigation systems and infotainment features.
Harman will add a fourth division to its three primary businesses: infotainment, lifestyle and professional.
Symphony Teleca makes software and platforms for mobile and connected devices, systems of engagement and is in the analytics solutions business. The company has a little over 300 clients including Google, Intel, Jaguar Land Rover and Microsoft.
“The Internet of Things (IoT) is ushering in a rapid convergence of experiences, content and commerce and advancing technology from digital to connected to intelligent systems. The acquisition of Symphony Teleca is a transformative step for Harman that gives us immediate scale in software services. With the addition of cloud, mobility and analytics competencies, we will accelerate solutions for the connected car and for a broader set of industries and markets,” said Harman’s Paliwal.
MANY FEATHERS IN HIS CAP
Graduated from IIT-Bombay; MS and PhD degrees in electrical engineering from Carnegie-Mellon University
Founded Aspect Development in 1991; sold it to i2 Technologies in 1999 for $9.3 bn
Founded Wadhwani Foundation in 2000
Founded Symphony Technology Group, a strategic private equity firm
Group has over 20 firms in its portfolio, with combined revenues of $2.7bn
