HCL Technologies Eyeing $2 Billion Buyout Targets

India's fifth-largest IT firm says it will make a big-ticket acquisition before 2011and continue to look at moves in Europe and Japan

HCL Technologies on Thursday said a $1-2 billion buyout would fit in its acquisition strategy and it would definitely make such a big-ticket acquisition before 2011, while refusing to comment on Axon. CEO Vineet Nayar added the firm continued to look at sub-$100 million acquisitions that would give it niche capabilities or access to markets such as continental Europe and Japan.

"We have been doing sub-$100 million deals so far. We would go for a large $1-2 billion acquisition in the US or Europe anytime before 2011," Mr Nayar said. While he didn't comment on speculation that HCL is raising funds up to $1 billion for acquisitions, he said funding was not a problem for the company. HCL Technologies has close to $600 million in cash and no debt on its books.

The country's fifth-largest IT firm had recently roped in consultancy firm Bain to identify growth opportunities. It identified eight focus areas where HCL aims to be among the top three global vendors by 2011. These include engineering services, enterprise application services, the newly-launched enterprise transformation services and infrastructure services. Besides organic growth in these areas, HCL Tech is also scouting for acquisitions.

Following the recent developments in the global financial services markets Mr Nayar said there would be more concern among companies across sectors. "No one can predict whether this is the beginning, middle or the end of the crisis. It's now irrelevant whether or not these are our clients. In the short term, there would be a huge concern across industries and the sentiment on spending would come under pressure," he said.

However, this would also spark more outsourcing by companies in continental Europe and Japan that have traditionally not outsourced. "We are seeing more deals on the table now. Companies in Europe that have maintained they would never outsource are now talking outsourcing. As the economic environment becomes difficult, these companies would look at reducing costs and outsource," Mr Nayar said.

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