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Cognizant to Pay $1.3 Billion in Belcan Acquisition

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The engineering resources and development company will slot in as a Cognizant operating unit. IT consultancy and reseller Cognizant signaled its high priority for engineering services by announcing its intent to acquire Belcan. New Jersey-based Cognizant is buying Belcan from private equity investor AE Industrial Partners for about $1.3 billion in stock and cash. The deal, which reportedly would add $800 million in annualized revenue, would close in the third quarter of 2024. Belcan will keep its name and function as a Cognizant operating unit. Both companies say the engineering resource and development (ER&D) market is hot right now. Cognizant, in its announcement, estimated the ER&D services market at $190 billion currently, with a compounded annual growth rate (CAGR) of 10%. Cognizant, in a news release, said adding Belcan will improve its existing Internet of Things (IoT) and digital engineering practices. But perhaps more importantly, Cognizant is expanding its vertical expertise into aerospace and defense and adding Belcan’s “blue-chip client base.” Cognizant, on the other hand, can offer IT solutions around AI, cloud, and data to Belcan’s customers, Cognizant CEO Ravi Kumar said. Google Cloud recently recognized Cognizant for its work in data analytics, and Microsoft recognized it for intelligent automation. “We see the opportunity to immediately accelerate revenue growth and create compelling shareholder value through our combined engineering capabilities,” Kumar said. “Belcan’s clients would gain access to Cognizant’s full suite of technology services, while Cognizant’s clients across the manufacturing, automotive, energy, and high-tech sectors we believe will benefit from Belcan’s engineering skills.” The combined company would employ more than 6,500 engineers and technical consultants, Cognizant said. Cognizant, in late 2023, bought ServiceNow partner Thirdera. Belcan Acquisition History Cincinnati, Ohio-based Belcan launched in 1958 and won key contracts over the years with Procter & Gamble and General Electric. Aerospace and industrial vertical-focused AE bought Belcan in 2015 for an undisclosed sum. The PE firm went on to tuck in 17 acquisitions into Belcan, including software engineering company Avista and workforce management solutions provider RTM Consulting. Belcan CEO Lance Kwasniewski will continue to lead Belcan as a Cognizant operating unit. “We are excited about this unique combination and the value creation it will bring to our customers, along with the opportunities it will provide for our employees. Cognizant will better position our team to capitalize on compelling tailwinds, including increasing outsourced ER&D spend, the transformative impact of digital engineering adoption rates, robust commercial aerospace demand, and favorable long-term defense and space spending,” Kwasniewski said. “Belcan’s experienced team has built a growth-oriented business delivering highly complex, mission-critical, scalable services to our long-standing customer base. I look forward to continuing to lead our team as we unite and leverage Belcan’s and Cognizant’s comprehensive services and cross-industry clientele to execute on our collective strategy, ultimately earning the role of our clients’ most trusted partner in intelligent engineering.” Cognizant drove $19.4 billion in fiscal year 2023 revenue.

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Payhawk Looks to M&A After 86% Revenue Jump

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Spend management platform Payhawk is reportedly entering acquisition mode. Co-founder and CEO Hristo Borisov stated in an interview with CNBC on Thursday (June 6) that the company aims to acquire early-stage startups that have already raised significant funds. He asserted that Payhawk has a better “product-market fit” than its competitors, who have achieved multibillion-dollar valuations by offering free corporate cards to other startups. Payhawk issues smart cards for employees to make payments and track expenses, and it has seen significant growth in the first quarter of the year, with revenues up 86% and a 57% increase in customers. To build on this growth, Borisov mentioned that the company hopes to merge with or acquire other firms. “Many businesses that got funded in the last two or three years are now in a position where they’re looking at strategic options,” Borisov said. “This is something we’re actively doing. We’re looking for companies to buy.” “Our vision is to be able to provide a single platform that provides a homogeneous environment for your corporate expense needs with a single provider,” he added. “There is going to be some market consolidation.” These efforts coincide with the shift from traditional expense management methods to digital solutions that speed reimbursement times and reduce the risk of human error. This trend was highlighted in a recent PYMNTS report, which discussed how businesses are embracing artificial intelligence (AI) and machine learning algorithms to optimize procurement and spend management strategies. Edwin Poot and Jonathan Vaux, global chief technology officer and head of propositions and partnerships at Thredd, discussed with PYMNTS how the largest corporations in America still use very old, monolithic systems to manage their treasury functions. Ernest Rolfson, CEO and founder of Payments-as-a-Service solution Finexio, pointed out the inefficiency of manually filing reporting and reconciliations, advocating for automated, digital solutions. Research by PYMNTS Intelligence has shown that virtual cards and digital spend management solutions can help finance departments close books faster while also guarding against fraud.  

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Investmint Halts Trading Operations to Focus on Merger and Acquisition Strategy

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Investmint, a signal-based trading app, has ceased its trading services to concentrate on merger and acquisition (M&A) opportunities, as reported by Entrackr. The company is actively exploring acquisitions with wealth management firms after withdrawing Investmint as a product due to the inability to develop a reliable business model. A spokesperson for Investmint confirmed to Entrackr, “We’re in late-stage talks with a few big players for M&A.” Should these talks fail, the company may return the remaining capital to its investors. Despite achieving significant traction and retaining funds from its previous fundraising, Investmint struggled to convert these resources into revenue. In October 2022, Investmint secured $2 million in seed funding, led by Nexus Venture Partners. Founded in February 2022 by Aakash Goel and Mohit Chitlangia, Investmint aimed to simplify stock market operations for regular investors through data-driven and scientifically-backed trading and investment products. The decision to halt operations follows a pattern seen among start-ups unable to achieve a sustainable business model or product-market fit. For instance, fashion start-ups Fashinza and Virgio returned investor capital in March after altering their business models. Similarly, digital health start-up Nintee shut down in April, with founder Paras Chopra announcing the return of most raised funds to investors.

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Silver Lake Resources Shareholders Approve Merger with Red 5

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In a significant development, shareholders of Australian gold producer Silver Lake Resources have given the green light to a merger with domestic peer Red 5. This approval brings the companies closer to completing the deal through a scheme of arrangement, which involves Red 5 acquiring all shares of Silver Lake. The next step involves seeking the court’s endorsement, with a hearing scheduled for June 6, 2024. If the court gives its approval at this second hearing, Silver Lake plans to make the scheme legally binding by registering the court’s orders with the Australian Securities and Investments Commission the following day. Trading of Silver Lake shares on the Australian Securities Exchange (ASX) is expected to be suspended from the close of business on June 7, 2024, assuming the scheme receives court approval. This merger is a significant development in the Australian mining sector and is expected to have a significant impact on the companies involved.  

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United States Steel and Nippon Steel Receive International Regulatory Approvals for Acquisition

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Pittsburgh-based United States Steel Corp. and Japan-based Nippon Steel Corp. (NSC) have announced that the proposed acquisition of U.S. Steel by NSC has received all necessary regulatory approvals outside the United States. The approvals include those from the Directorate-General for Competition of the European Commission, the Mexican Federal Economic Competition Commission, the Serbian Competition Commission, the Ministry of Economy of Slovakia, and the Turkish Competition Authority. Additionally, the United Kingdom Competition and Markets Authority confirmed that it had no further questions regarding the proposed transaction following the submission of a voluntary briefing paper by U.S. Steel and NSC. David B. Burritt, president and CEO of U.S. Steel, stated, “We are pleased with the regulatory approvals received, as they are a clear indication that the transaction with Nippon Steel is pro-competitive and supports the strategic merits of foreign investment.” He added that the deal is beneficial for American steel, jobs, and the country’s alliance with Japan against China. Takahiro Mori, vice chair of the board of NSC, remarked, “We appreciate this significant milestone of receiving regulatory approvals necessary to consummate the transaction from all non-U.S. authorities. Our goal for this transaction has been clear and consistent – to protect and grow U.S. Steel.” In the United States, several politicians, including likely nominees in the 2024 presidential election, have expressed opposition to the deal, citing job protection and national security concerns. In April, 71 percent of the outstanding shares of U.S. Steel common stock voted in favor of the proposed transaction, representing 99 percent of the shareholders who cast a vote. Despite the opposition in the U.S., both companies expect the transaction to be completed in the second half of this year, subject to the fulfillment of the remaining customary closing conditions, including the receipt of required U.S. regulatory approvals.

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T-Mobile to Acquire U.S. Cellular for $4.4 Billion to Enhance Rural Service

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T-Mobile announced on Tuesday that it will acquire the wireless operations of U.S. Cellular for $4.4 billion, a strategic move aimed at enhancing service in rural areas. This acquisition, set to close next year, will add approximately four million new customers to T-Mobile’s base. Despite the sale, U.S. Cellular will retain about 70% of its wireless spectrum licenses and cell towers. The merger is seen as a response to an increasingly consolidated mobile market. T-Mobile CEO Mike Sievert stated, “As customers from both companies will get more coverage and more capacity from our combined footprint, our competitors will be forced to keep up—and even more consumers will benefit.” U.S. Cellular’s Board Chair, LeRoy T. Carlson, Jr., emphasized the need for scale and investment to remain competitive, citing the benefits of integrating their operations with T-Mobile. This move follows T-Mobile’s recent acquisitions, including the $1.35 billion purchase of Ka’ena Corporation, the parent company of Mint Mobile and Ultra Mobile, which was approved by the Federal Communications Commission (FCC) last month. T-Mobile also merged with Sprint in 2020. However, T-Mobile’s expansion efforts come amid heightened antitrust scrutiny. The Federal Trade Commission (FTC) and the Department of Justice (DOJ) have been increasingly vigilant, challenging numerous mergers last year. The revised merger guidelines released six months ago reflect this rigorous oversight. Whether the acquisition of U.S. Cellular will face significant regulatory hurdles remains to be seen.  

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Zee Entertainment Bears Rs 432 Crore Merger Costs Amid Failed Sony Deal

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Zee Entertainment Enterprises Ltd. faced significant financial setbacks amounting to Rs 432 crore due to its failed merger deal with Sony Group Corporation’s Indian media unit, Culver Max Entertainment. The merger agreement was terminated on January 22, sparking a series of financial implications for Zee Entertainment. Key Points: Merger Costs: Zee Entertainment incurred merger-related costs of Rs 432 crore during the financial years 2023-24 and 2022-23. These costs were attributed to the failed merger deal with Sony’s India unit. Impairment Charges: As part of portfolio rationalization and meeting merger conditions, Zee Entertainment incurred impairment charges of Rs 331 crore in 2022-23. This was due to the closure of certain businesses, including Margo Networks. Employee Termination Costs: Zee Entertainment recorded an employee termination cost of Rs 22 crore in a recent restructuring, which included a 15% reduction in its workforce as part of cost-cutting measures. Arbitration Cases: Zee Entertainment faces arbitration cases filed by Culver Max Entertainment and Star India. Culver Max is seeking $90 million in termination fees, while Star India is seeking directions regarding the implementation of the International Cricket Council TV rights agreement. Merger Plan Timeline: The $10-billion merger proposal between Zee Entertainment and Sony Group Corp. witnessed key events such as board approvals, termination of the merger plan by Sony in January 2024, and subsequent legal actions by Zee Entertainment against Sony Pictures Networks India. Reasons for Termination: Sony terminated the merger plans citing unsatisfied closing conditions after two years of negotiations. Disagreements over financial terms, cash availability, and leadership appointments, particularly regarding Punit Goenka, contributed to the termination. Financial Performance: Despite the challenges, Zee Entertainment reported a consolidated net profit of Rs 13.35 crore in the March quarter, marking a recovery compared to the previous fiscal period.  

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Competition Commission of India to Soon Introduce New Merger Regulations

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The Competition Commission of India (CCI) will soon release a new set of merger regulations following the amendments to the competition law enacted last year. These regulations are expected after the model code of conduct is lifted post-elections, as certain provisions of the amended law need to be notified by the government. According to the amendments, CCI approval is required for any transaction valued over ₹2,000 crore. CCI Chairperson Ravneet Kaur announced on Monday that the regulatory framework under the Competition (Amendment) Act, 2023, is in the final stages. This framework incorporates global best practices to address emerging market competition challenges. The new regulations will cover negotiated settlements on anti-competitive practices, merger and acquisition regulations based on deal value, and an expanded leniency scheme to encourage cartels to come forward. The upcoming focus is on merger regulations. The new merger regulations will detail how to assess the transaction value for CCI approval and expedite the merger regulation process by reducing the maximum decision time from 210 days to 150 days. These regulations aim to clarify and streamline the merger approval process, particularly for transactions exceeding ₹2,000 crore, even if they do not meet the traditional asset and sales thresholds. Kaur emphasized that the digital economy’s rise has prompted a global revamp of competition laws. The Ministry of Corporate Affairs is working on a Digital Competition Bill to address systemic digital economy firms’ issues. Public consultations on a draft bill are complete, and inter-ministerial consultations will follow before presenting it to parliament. In addition, CCI is initiating a market study on artificial intelligence (AI) to understand its impact on competition. Kaur highlighted the need to regulate digital markets to prevent dominance by a few companies and address data dominance concerns. Attorney General R. Venkataramani, speaking at an event marking CCI’s 15th foundation day, underscored the importance of regulating data as a new currency. He noted the global regulatory actions against data gatekeepers and the ongoing debate in India over the draft Digital Competition Bill, which will determine CCI’s approach to regulating digital markets.  

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IDFC First Bank Shareholders Approve Merger with IDFC Ltd

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IDFC First Bank shareholders have approved the merger of IDFC Limited with the bank, marking a significant step in the amalgamation process. The National Company Law Tribunal (NCLT) convened a meeting on May 17, 2024, to consider and approve the composite scheme of amalgamation involving IDFC Financial Holding Company merging into IDFC Limited, and subsequently, IDFC Limited merging into IDFC First Bank. In the approved reverse merger scheme, IDFC shareholders will receive 155 shares of IDFC First Bank for every 100 shares they hold in IDFC Limited. Both IDFC Ltd and IDFC First Bank shares have a face value of ₹10 each. The resolution was passed by the requisite majority, with over three-fourths in value of the equity shareholders voting in favor. Additionally, the scheme received overwhelming support from Non-Convertible Debenture (NCD) holders, with 99.99% voting in favor through remote e-voting and e-voting during the meeting. The Reserve Bank of India (RBI) had already given its nod for the reverse merger in December 2023. The merger was initially approved by the boards of IDFC Financial Holding Co. Ltd, IDFC Ltd, and IDFC First Bank in July 2023. Following the announcement, IDFC First Bank shares ended 0.26% higher at ₹77.44 apiece on the BSE on Saturday. This merger aims to streamline the corporate structure and enhance the operational efficiencies of the entities involved, potentially leading to better value creation for shareholders.

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Despite Increased Transactions, M&A Activity Sees Sharp Decline in April

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According to a report by a consultancy firm, the overall merger and acquisition (M&A) activity by value witnessed a significant decline of 60% in April, totaling $5.192 billion compared to March’s $12.934 billion. Surprisingly, there was a 24% increase in the number of deals, totaling 176 transactions during the month. The decline in value was particularly notable in merger and acquisition transactions, which dropped by 75% to $2.526 billion, down from $10.212 billion in March. Private equity transactions, on the other hand, saw a marginal decrease to $2.666 billion. Within the M&A landscape, outbound deals experienced the sharpest decline, plummeting to $24 million compared to $9.072 billion in the previous month. The highest M&A activity of the month was attributed to the Adani group’s 8% stake increase in Ambuja Cement and ACC, amounting to a cumulative $1.8 billion in two transactions. Despite the dip in M&A activity, the outlook for 2024 remains positive, with India poised for growth and investment opportunities. Factors influencing the domestic markets in the near term include the outcome of the Lok Sabha elections and global and domestic trends in interest rates driven by inflation and supply chain dynamics. Overall, while the number of transactions increased, the decline in M&A activity by value underscores the complexities and challenges within the market landscape.  

Despite Increased Transactions, M&A Activity Sees Sharp Decline in April Read More »