The mega-rich IT services companies TCS, Wipro, and Infosys are likely to go on an acquisition spree to buy their rivals at a discounted price post-COVID. These three big companies have a combined cash reserve of $13 billion. With the help of this money, they would able to buy other companies for a small investment.
These acquisitions can help them gain market access and strategic capabilities. This could also boost their income once the situation becomes normal.
A TCS spokesperson said that their marketing and acquisitions have been at peak during this financial crisis. He also added that they fell that the best time to buy is when no one else is buying in the market. A similar example in 2008-09 when the recession is at peaks, TCS bought Citigroup’s captive business center in India for $505 million. This, in turn, helped TCS to a decade long $2.5 billion contract with the global bank.
At the end of March, the net cash holdings by TCS, Wipro, and Infosys are at $5.9 billion, $3.53 billion, and $3.6 billion respectively. TCS has purchased several firms in the past like Bridgepoint Group and Design firm. Among these firms, Wipro has participated in the most number of acquisitions. A Wipro spokesperson has said this is the best time to look for an M&A.
Since 2016, Wipro has acquired HealthPlan Services(HPS), Appirio, a cloud enablement firm, and some design consultancies. Several analysts also feel that this is the right time to buy companies due to lower valuations. Recently in March, Infosys acquired Simplus, a Salesforce implementation partner for $250 million. Also for 1000 crore, it acquired Stater NV from ABN AMRO.