IBS Journal February 2015
Tech Mahindra acquires Sofgen
Indian services heavyweight, Tech Mahin- dra, has acquired Switzerland-based core banking systems specialist, Sofgen, for $29 million. Sofgen’s senior management and 533 staff will form an autonomous unit within the new parent and will add to Tech Mahindra’s activities in the financial ser- vices sector. Sofgen chairman, Alex Dembitz, who
will remain as chairman of the new unit, says that his company was in discussions with three other potential acquirers, all similarly large, international IT companies. 2014 was the best year in Sofgen’s history, with revenues of around $45 million, he adds, but it was felt that ‘combining with a major institution would help us realise our full potential’. The attraction of Tech Mahindra to
Sofgen was based on a perceived synergy. Just over half of its business is in telecoms, with banking making up around ten per cent. The bulk of that business is described by Andre Israel, Sofgen’s co-CEO, as ‘around the bank’, such as BPO, comple- menting Sofgen’s ‘change the bank’ focus. Sofgen brings expertise centred on
Temenos’ T24 and Avaloq’s private bank- ing system. Originally a Temenos special- ist, just under half of its revenue today is from this source, says Israel, with slightly under a quarter derived from the Avaloq business. The company’s diversification has also seen a step up in activities related to digital banking, regulations and com- pliance, and cost control, he adds. It has around 200 staff in offshore development centres in Chennai and Manila. Partnerships with ERI and TCS Finan-
cial Solutions have had only ‘limited suc- cess’, Israel admits, but there are prospects related to each. A couple of the pros- pects via the ERI partnership are for Sof- gen’s Savetax tax calculation and report- ing application, which is also part of the acquisition. In terms of the success of Sofgen over
the previous twelve months, Dembitz feels that this has been, in part, to do with the brand building that has been done over the years, reflected in more end-to-end projects, joint bids with some of the big four consultants, and more work across all regions. Israel says Sofgen brings around 150 clients for cross-selling Tech Mahindra
16 © IBS Intelligence 2015
Tech Mahindra development centre ©Ranjit Nair, Commons Wikimedia
services, such as BPO. Conversely, Sof- gen should benefit from Tech Mahindra’s resources and financial muscle, helping it to win tier one clients that were previously beyond its reach. Around half of Tech Mahindra’s rev-
enues are from the Americas and it had EBITDA of $687 million in the 2014 finan- cial year on revenues of $3,098 million. It has made a number of acquisitions in recent years and part of its mission state- ment is for inorganic growth. It picked up
the troubled Satyam in 2009, with this ful- ly incorporated into the group in 2013, at which time Tech Mahindra became the fifth largest IT services company in India, behind TCS, Infosys, Wipro and HCL. It is the IT sub- sidiary of Mahindra & Mahindra Ltd. Sofgen originally sought private equi-
ty in 2011. It had previously spoken to Tech Mahindra but discussions were revived in Q1 2014. The Sofgen name will be retained. Sofgen was advised by India-based Aven- dus Capital Private Ltd.
IN BRIEF
Temenos has offloaded the non-banking part of the jBase database business. The acquirer is US-based Zumasys, a cloud computing specialist. The sale does not affect any users of T24 that run their core system on jBase.
The vendor has stated to IBS that it will ‘continue to support and maintain the product’ and that it continues to own its IP. ‘There have been no personnel trans- fers as part of the deal, and all knowledge and resources remain with Temenos,’ the vendor’s spokesperson goes on to say. ‘All existing T24 users remain contracted to Temenos and this will not change. There is no impact on the terms or prices.’ When jBase software was acquired by Temenos back in 1999, it came with two
versions, one for the Temenos clients (TAFC, which stands for ‘Temenos application framework for C’) and one for non-T24 customers outside the banking sector (via a distributor). Temenos supported both after the acquisition. In addition to buying the non-T24 part of jBase, Zumasys has also purchased the distribution rights from the distributor. ‘Temenos’ focus is on banking, and the part of jBase that has been sold relates
to non-banking clients. This deal means that any non-banking obligations and risk is removed from the business,’ says the spokesperson. ‘It ensures that future devel- opment and support is domain centric.’ However, the jBase database is not offered to new customers, and all new sales
are made on third party database offerings (e.g. Oracle, Microsoft and IBM). As for the existing jBase users, the vendor reassures that it ‘will continue to support the product indefinitely’, but suggests that they can move to an alternative platform should they wish to upgrade.
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news: mergers & acquisitions
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