Report: Bain-Backed Outsourcing Firm Looking To Buy Syntel

Business process outsourcing (GPO) firm Genpact is examining an acquisition of Syntel to bolster its IT services and automation capabilities, according to media reports.

The Times of India reported that New York-based Genpact and its principal shareholder, private equity giant Bain Capital, have been considering an acquisition of Troy, Mich.-based Syntel for several months, with discussions progressing slowly. Syntel, No. 40 on the CRN Solution Provider 500, and Genpact declined to comment for this story.

Wall Street has responded very favorably, with Syntel's stock rising 8.5 percent since the report came out to $47.97 per share.

[Related: Syntel Rolls Out Robotic Automation Platform]

The deal, if completed, would add $911 million to Genpact's $2.27 billion of annual sales, and make it easier for Genpact to offer its clients integrated BPO and IT services. Genpact was one of the finalists to buy Bridgewater, N.J.-based solution provider iGate, according to the report, but was outbid by French IT conglomerate Capgemini, No. 5 on the CRN SP500, which paid $4.04 billion.

Bain has been the largest shareholder for Genpact since 2012, and today controls roughly a 26 percent stake of the New York Stock Exchange-listed company. Genpact began in 1997 as a business unit within General Electric, became an independent company in December 2005, and today has 68,000 employees and more than 800 enterprise customers.

Syntel derived nearly half -- or more than $105 million -- of its revenue in the most recent quarter from banking and financial services, as well as roughly 15 percent -- or between $34 million and $38 million -- of sales from each of three other verticals: retail, logistics and telecom; health care and life sciences; and insurance. Syntel was founded in 1980, and has been led by Nitin Rakesh since April 2014.

Nearly half of Syntel's revenue comes from just three clients: American Express, State Street Bank and FedEx. Though Syntel is based in the U.S., more than three-quarters of its 17,300-person workforce is based in India.

Syntel in February introduced a robotic automation platform that can lower business operations costs for end users by 30 percent and downtime by roughly 30 percent by eliminating repetitive manual processes.

Private equity has been the driver behind many recent large solution provider acquisitions.

DLT Solutions, No. 39 on the CRN SP500, was acquired by Millstein & Co. in February; Presidio, No. 22 on the CRN SP500, was purchased by Apollo Global Management in December; Accuvant, No. 48 on the CRN SP500, was sold to the Blackstone Group in March 2014; and CompuCom, No. 23 on the CRN SP500, was acquired by Thomas H. Lee Partners in April 2013.

Bain was rumored in September to be exploring a leveraged buyout of giant CSC, but no deal was agreed upon and the system integrator, No. 4 on the CRN SP500, agreed last week to split its commercial and government businesses into separate companies.

PUBLISHED MAY 27, 2015