Mergers, Acquisitions, Alliances and Synergies Case Study

Case Title:

Capgemini’s acquisition of Kanbay International: The Road Ahead

Abstract:

Capgemini was one of the world’s leading providers of Consulting, Technology, Outsourcing and Local Professional Services with regional operations in North America, Northern Europe, Asia Pacific and Central & Southern Europe. On October 26, 2006 Capgemini announced its acquisition of Kanbay International, a global IT services firm that offered management consulting, technology integration, application development and outsourcing solutions mainly in the financial services vertical. Kanbay was a US based company with a strong presence in the American and Indian market. The acquisition, valued at $1.25 billion and scheduled to be completed by early 2007 was an all cash deal that sought to address Capgemini’s shortcoming in the financial services market and its beleaguered presence in the U.S. market. The transaction was also intended to help Capgemini consolidate its presence in the Indian market by adding up Kanbay’s employees to its Indian workforce thereby making it the third biggest non Indian player in terms of the total headcount in the country next only to IBM and Accenture.

The case outlines the establishment of Capgemini, its growth and the spate of acquisitions over the years. It provides insight into the rationale for its acquisition of Kanbay by highlighting the potential benefits of enhancing its presence in the US financial services market, augmenting its business process outsourcing offerings and gaining an edge over its European counterparts in the offshore region by scaling up its Indian operations. The main issue the case tries to highlight is the concern raised by industry analysts about the Kanbay acquisition in the backdrop of Capgemini’s troubled acquisition of Ernst and Young which had not yielded the desired synergies. This was mainly attributed to differences in the cultures of both the entities. It was to be seen if Capgemini would successfully integrate Kanbay into its portfolio.

Pedagogical Objectives:

• To discuss acquisition strategies followed by companies for inorganic growth
• To discuss how companies can handle post acquisition challenges.

Keywords : Mergers,Acquisitions,Alliances Case Study;Capgemini; Kanbay; Global Consulting Companies; Global IT Services Industry; Acquisition; Ernst and Young; Paul Hermelin; Raymond Spencer; BFSI Space; Financial Services Market; I Cubed Strategy Baru S Rao; Competition; Inorganic Growth; Outsourcing market