Atos acquires American IT services company Syntel for $3.4 billion

23 July 2018 Authored by Consultancy.eu

French IT services giant Atos has acquired Syntel in a deal worth around $3.4 billion. The integration bolsters Atos’ position in the Northern American market and sees 23,000 employees join Atos’ ranks. 

Thierry Breton, Chairman and CEO of Atos said that he is proud to announce “such an important milestone” in the firm’s history. “Syntel is a leading digital company that will significantly enhance our digital services offering.”

Founded 38 years ago, Syntel is an information technology company with 23,000 employees in 30 countries, with over 18,000 staff based in India – 89% of the company’s revenues ($924 million revenue in 2017) are however generated in the North American market. The company has a track record in services across the IT landscape, being particularly strong in topics such as automation, data science, social media, cloud and mobile. 

According to Breton, the Syntel deal will bring rise to three major benefits. First, Syntel’s expertise and client base will expand Atos’ Digital services and Business & Platform Solutions. “The two organisations are fully complementary in their customer base, geographies, and services,” explained Breton. Sectors that are expected to benefit most are Banking and Financial Services, Healthcare, Retail, Logistics, Manufacturing, and Insurance. Atos acquires American IT services company Syntel for 3.4 billion dollarSecondly, Michigan-headquartered Syntel will allow Atos to grow its position in North America. The French-origin firm has a leading position in most European countries, yet in the US, the globe’s largest market for IT services and consultancy, the firm’s market share was trailing somewhat. Atos has in recent years used M&A to rapidly gain ground, among others acquiring Xerox ITO in 2014 for around €880 million and three US-based healthcare consultancies last year. “Syntel will significantly enhance our presence in North America and also improve the margin profile of our North American operations [Syntel had an operating margin of 25% in 2017],” said Breton.

Thirdly, Breton expects the integration to deliver “compelling and significant synergies” both at cost and revenue levels. The complementary customer base will generate multiple cross-selling opportunities, with revenue synergies of around $250 million targeted to be achieved by the end of 2021. Meanwhile, operational improvement at both sides of the table (engagement delivery, onshore/offshore headcount mix, SG&A costs including real estate and procurement) are eyed to generate a cost benefit of $120 million per year on a run rate basis by the end of 2021. 

As part of the integration, Syntel CEO Rakesh Khanna will join Atos’ Executive Committee and all of Syntel’s executives and management are expected to join Atos’ leadership teams across the 73 countries in which it operates. 

Bharat Desai, Co-Chairman and Co-founder of Syntel, commented: "This is a very exciting development for Syntel. I am grateful for the trust and confidence of our customers and the passion, commitment and innovative spirit of our employees. Together they have enabled Syntel to achieve great heights. I am confident that this combination will deliver significant value to all stakeholders.” 

The transaction between Atos and Syntel – the French giant is with a stock market value of $13 billion – was financed through debt fully underwritten by BNP Paribas and J.P. Morgan.

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