Wipro Buys Consulting Business Capco for $1.45 Billion

By Luigi Wewege Friday, March 5, 2021

Wipro offices in Silicon Valley.

Wipro, the India-based tech and consultancy company, has agreed to acquire British consultancy business Capco from Clayton, Dubilier & Rice in a $1.45 billion deal as it attempts to attract new European and Asian customers.

A Good Fit for Wipro

Wipro emphasized that itself and Capco share complementary business models and said the deal is expected to close by the end of June. The British consulting company was founded in 1998, and it has some major clients from the global financial services sector, including capital markets.

The consultancy business has around 5,000 employees and secured about $80 million from investors 20 years ago. Capco is “widely acknowledged for its deep domain and consulting expertise, risk and regulatory offerings and thought leadership around key industry technology challenges and opportunities,” the two companies said in a joint statement.

“Together, we can deliver high-end consulting and technology transformations, and operations offerings to our clients,” said Wipro’s chief executive Thierry Delaporte.

He stepped up as the CEO last year, replacing Abidali Neemuchwala, who was the head of the company for four years and failed to deliver the Indian company’s target of becoming a $15 billion company by 2020. Wipro reported business revenues of $8.1 billion at the end of March 2020.

The Indian company is hoping that the acquisition of Capco will help it win new clients from Europe and Asia. Furthermore, Wipro has announced that it is looking to buy new firms. The acquisition will dilute the Indian giant’s margins before interest and taxes by roughly 2% in the first year, though the company expects improvements in the future thanks to revenue and cost synergies.

The business deal will also weigh on earnings per share in the first year, and Wipro said it expects improvements from the third year. However, it seems that investors aren’t in favor of the Capco takeover as they are worried about the premium valuation paid for Capco.

"The key lies in execution and extracting value from the acquisition. Wipro’s track-record on that score from acquisitions over the last two decades has been less than average. Despite doing the most M&As among India IT firms, Wipro has slipped in revenue ranking within the industry in the last ten years," Nirmal Bang Securities Ltd said in a note sent to clients.

Wipro stock price fell about 3.8% on Friday.

Summary

Indian IT business Wipro said it has agreed to buy the British consultancy firm Capco for $1.45 billion as it works to lure new clients from Europe and Asia.

About the Author


Headshot for author Luigi Wewege

Luigi Wewege is the Senior Vice President, and Head of Private Banking at Caye International Bank. Outside of the bank, he serves as an Instructor at the FinTech School which provides online training courses on the latest technological and innovation developments within the financial services industry. Luigi is also the published author of: The Digital Banking Revolution.

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