Capgemini to Buy iGate in $4 Billion Deal: 10 Facts

French IT services company Capgemini has announced the acquisition of iGate at $48 per share, valuing it at $4 billion. Here are 10 key takeaways from the deal:

1) The iGate acquisition will help the combined entity to compete on par with the other US-based and Indian-based companies, which have a large of number of their employees based in India, said Capgemini CEO and chairman Paul Hermelin. "This will also give to the group's Indian operations a new scale, allowing us to compete on par with the best US-based and Indian-based companies," he said in a statement.

2) This combined entity will have revenue of 12.5 billion euros in 2015 or ($13.58 billion) and around 190,000 employees. Nearly 48 per cent of the group employees are based in India.

3) Analysts say the acquisition of iGate will help Capgemini compete aggressively with Indian and American IT companies that have significant Indian operations. "Indian IT companies may find the going tough. There is nothing left to be bought, to scale up inorganically," Kannan Kasi, founder and CEO of Gyanagni Consulting, said in a tweet.

4) The iGate delivery footprint may be especially interesting to Capgemini which has been trying to grow its presence in tier II cities in order to reduce labour costs and iGate may be an accelerant to this effort, HfS Research said. iGate enjoys operating margin of 18.7 per cent as opposed to 9.2 per cent for Capgemini.

5) The acquisition of iGate will help the French IT company to increase its share of revenues from North America. North America is iGate's largest market, representing 79 per cent of revenues in 2014, followed by Europe (14 per cent) and Asia-Pacific (7 per cent). After completion of the iGate acquisition, Capgemini's North America revenues would go up by a third. In contrast, Capgemini gets around 20 per cent of its revenues from North America, says HfS Research.

6) iGate's footprint in financial services will be a big boost for Capgemini, say analysts. "Most of the leading service providers today are looking at niche buys that specifically add software IP or a vertical capability, such as Cognizant/Trizetto, or Infosys/Panaya. However, in Capgemini's case, there are still some significant holes in its portfolio to fill out, most notably a more powerful presence in India, a stronger portfolio of US enterprise clients, and a deeper foothold in financial services. iGate brings these to the table," said HfS Research, which gave a thumbs up to the deal.

7) iGate will become a subsidiary of Capgemini North America Inc.

8) The combination of iGate and Capgemini will provide cross-selling revenue synergies of $100-150 million and annual efficiency gains of $75-105 million, the companies said.

9) The transaction is expected to close in the second half of 2015.

10) Capgemini had in 2006 acquired Kanbay International, which had significant operations in India. This helped increase Capgemini's presence in India.