Mergers, Acquisitions and Takeovers Case Study

HCL’s Acquisition of Axon: A Right Decision in the Gloomy IT Scenario?

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Abstract:
In the last week of September 2008, HCL Technologies, India's fifth-largest IT services player, announced a cash offer of 650 pence a share for the UK-based system application products consulting company Axon Group, valuing it at £441.1 million. The merger would be the largest overseas acquisition by an Indian IT company. With the sub-prime crisis affecting the global IT sector HCL's merger with Axon is an opportunity for the company to increase revenue, consolidate its enterprise application business and widen its geographical spread on an international scale. The combination is expected to create significant incremental value for both customers and employees as the CEO states that the focus would be on making two plus two equal eight. HCL management is, however, committed to making the company's brand name the most valued one from 2010 onwards. The case analyses HCL's strategy in this context, analysing the need for mergers and acquisitions (M&As) during an economic downturn.

Pedagogical Objectives:

• To the need for M&As for companies who want to grow globally.
• To the Axon acquisition will help HCL become a brand name in the IT universe.
• To the synergy in business operations of the two companies that could help in consolidation.
• To whether acquisitions are a good strategy during an economic downturn?.

Keywords : HCLf's acquisition of Axon, HCL, Axon, IT sector, Gloomy IT scenario, HCL's inorganic growth strategy, Future growth of HCL, SAP (system application products)

Contents : 
HCL and Axon: An Overview
Axon Group: Ready Reckoner
Axon Earnings per Share
The Acquisition Deal
HCL Technologies as a stand-alone entity prepared under Indian GAAP