Economic turmoil in Europe and a weak euro have offered Indian information technology (IT) firms a chance to explore mergers and acquisitions (M&As) in that market and reduce their dependence on the US. At least two large Indian IT companies are already looking to buy out European assets. The current European crisis presents once again an opportunity for Indian techs to pursue inorganic growth opportunities to address the gaps in service/vertical portfolio after missing out on the same during 2008. Indian companies are looking at a strategic fit which will enhance their presence in Europe, get them access to large customers and provide with more domain competency. Valuation is one of such factor that companies are looking at.
In the past few years, Indian IT companies have been trying to lower risk by reducing their dependence on the US, from where they get nearly 60% of their revenues. However, most companies are yet to establish a significant presence in the European outsourcing market outside the UK. The ongoing debt crisis could translate into lower valuations. With better buying power of an appreciating rupee, it presents a second window of opportunity for most Indian IT firms that missed out on making major acquisitions in the US or Europe during the slowdown that started in 2008. Industry observers also say that it is time Indian IT companies make large acquisitions to be able to tap into the next phase of growth.