Hexaware Technologies, a leading global IT & BPO services provider, on Monday signed an agreement to acquire 100% equity of FocusFrame Inc in an all cash deal for $34.3 million.
The acquisition is likely to close within 6 weeks.
As per the terms of the agreement, $25 million will be paid in cash on closing with the balance amount being paid out over 24 months contingent on meeting projected revenue and margin targets. FocusFrame co-founders -- Vaughn Paladin and Suri Chawla -- will continue to run the operations as a fully owned subsidiary of Hexaware Technologies Ltd.
The acquisition will be EPS accretive for Hexaware.
FocusFrame is a California-based firm specialising in automated testing of ERP and custom applications. Their business revolves around systems verification, quality strategy and IT governance solutions, and various functional, performance, and system stress verification exercises.
It is the largest pure play partner of Mercury Interactive, the world's leading Quality and BTO vendor. A Premium partner, FocusFrame has won Partner of the Year award for last two years, and is the only Mercury partner to win awards in the last four Mercury World events.
It is also a Gold level Partner for SAP, performing functional and performance validation work for SAP users.
'Independent testing and verification services' is among the fastest growing business opportunities for offshore vendors. Gartner estimates the global market for independent Testing at $13 billion by 2010. Meta Group estimates the offshoring based Testing market to exceed $1 billion in 2007.
Commenting on the acquisition, Atul Nishar, Executive Chairman of Hexaware said, "Hexaware's Testing Practice currently has 400 consultants, 15 clients and contributes to 7.6% of the revenue. This acquisition completes the required set of Testing competencies that would allow increase in market share and accelerate growth.
FocusFrame's Mexico center is ready for scaling up as Hexaware's sixth full fledged global delivery center."
FocusFrame has a patented 'Accelerator' technology that consists of pre-defined business process testing components and functional libraries for SAP, Siebel and several other platforms. Its unique SAP Accelerator allows SAP users to reduce up to 40% of their testing costs.
"FocusFrame's partnership with Mercury and SAP opens huge new opportunities for Hexaware. Their "Accelerator" technology can be applied to practically any enterprise platform, including Peoplesoft and .Net. Such new tools will greatly enhance our ability to provide our customers with the most advanced automated testing frameworks, significantly reducing their testing costs and time," added Rusi Brij, vice chairman and CEO.
FocusFrame is likely to achieve revenues of $24 million for CY 06, with about 14% PBT margin. 85% of its revenues come from US, with the remaining from European clients.
The company has 9 Fortune 500 customers and has 7 'million-dollar' clients.
It has over 200 employees, a third of them located at the development center in Mexico.
Vaughn Paladin, Co-founder and CEO of FocusFrame said, "This merger is a perfect fit as it allows us to continue to deliver high quality, industry-leading testing solutions on a significantly larger scale."
"We can now leverage Hexaware's global delivery capabilities to offer an enhanced value proposition to much larger client base and our key partners," said Suri Chawla, co-founder and president of FocusFrame.
Additional inputs: Agencies
