Infosys to acquire Swiss SAP consultant Lodestone

Infosys, which will pay US$350 million for Lodestone, has been attempting to move into higher-value services

Infosys said Monday it has signed a definitive agreement to acquire Lodestone Holding, a management consultancy firm in Zurich with skills in the area of SAP software, as the Indian company attempts to move into higher-value services.

The outsourcer said it was acquiring Lodestone for an aggregate enterprise value of 330 million Swiss francs (US$350 million) in cash. The transaction is expected to be completed by October and is subject to customary closing conditions. Enterprise value includes debt, preferred stock and cash reserves apart from the market capitalization of a company.

Lodestone will bring more than 850 employees, including 750 experienced SAP consultants to the company. By the acquisition, Infosys hopes to add over 200 clients from Lodestone across industries including manufacturing, automotive and life sciences, taking the company's combined revenue from consulting focused on SAP programs to more than $1 billion.

The Lodestone acquisition will also enhance Infosys' global presence, particularly in continental Europe and emerging markets such as Latin America and the Asia Pacific region, the company said in a statement.

Infosys like other Indian outsourcers has been trying to reduce its dependence on time-and-material contracts that are billed by the number of staff working for a particular duration and instead focus on higher-value services such as consultancy, technology platforms and products in the areas of cloud computing, social media and mobile.

The company has been hit by slower spending in key markets such as the U.S. and Europe. In the quarter ending June 30, Infosys' annual revenue growth tumbled to about 5 percent in U.S. dollar terms in the second quarter, down from the 23 percent revenue growth the company had posted in the same quarter last year. Growth was higher in rupee terms because of the depreciation of the rupee against the U.S. dollar.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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