Capgemini To Acquire iGate To Take On Top U.S. Solution Providers

In a blockbuster move, Paris-based Capgemini said it plans to acquire U.S. company iGate for $4 billion as it looks to ramp up its North American presence.

Bridgewater, N.J.-based iGate focuses on integrated technology and operations-based solutions and will add key capabilities to the Capgemini portfolio around application, infrastructure services, BPO and engineering services. The $1.3 billion solution provider focuses mostly on the North American market but has a small presence in Europe and Asia-Pacific.

Capgemini said the North American region is "at the top of [its] strategic agenda." The acquisition will bring the North American market to 30 percent of the company's total revenue, the largest by percentage. The solution provider behemoth, No. 5 on the 2014 CRN Solution Provider 500, generated $11.5 billion in total revenue last year.

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"I am very pleased to announce a very important transaction in Capgemini’s history. [iGate] is a leading company that perfectly fits our strategic ambition. It will give us a new status on the American market, and take further our industrialization journey to offer ever more competitive services to our clients. 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. I am glad to welcome new talents and leaders to our Group, who share our convictions and professional culture," Paul Hermelin, chairman and CEO of Capgemini, said in a statement.

In addition to expanding its footprint in the region, Capgemini said the acquisition will add more expertise around its financial services business, an industry vertical that accounts for 42 percent of its total revenue. IGate also adds expertise in the health-care, retail and manufacturing verticals, the company said.

"In Capgemini, we have found a partner that will advance our ability to innovate and build industry solutions that will enhance the value proposition we bring to our clients. In addition, this powerful combination will provide exciting opportunities for our employees to expand their capabilities," Ashok Vemuri, CEO of iGate, said in a statement.

Patrick Heffernan, practice manager and principal analyst at Technology Business Research, said the acquisition falls in line with a strategic push toward North America put forward by top executives at an analyst's event earlier this year. The iGate acquisition will help give Capgemini the scale it needs to leverage the experience and expertise it has in European markets.

However, Heffernan said the acquisition alone won't be enough to put Capgemini head-to-head against industry behemoths such as Accenture. The company will have to focus on a careful integration and then invest around expanding consulting and digital capabilities if it wants to win in the market, he said.

"You can't buy your way into the U.S. market, especially if you don’t have that consulting capability that is going to give you the legs," Heffernan said.

Capgemini said the acquisition is expected to close in the second half of 2015. The integration of iGate with Capgemini North America is expected to take nine months after the deal is closed, and a new organization will be in place within three months according to the company.

PUBLISHED APRIL 27, 20 15