TBP Spotlight – Capgemini Acquires Altran for $4.1 Billion


Capgemini Acquires Altran for $4.1 Billion

Deal Financials

Capgemini and Altran deal

Transaction Overview

  • On June 24, 2019, French IT services and digital transformation leader Capgemini SE (ENXTPA:CAP) announced its $4.1 billion acquisition of Altran Technologies (ENXTPA:ALT), a French engineering and R&D services company.
  • The all-cash deal will be priced at $15.96 per share, a 22% premium from Altran’s closing share price on June 24, 2019. Capgemini secured a bridge financing of $6.1 billion to cover the purchase of securities ($4.1 billion), as well as the gross debt ($2.0 billion).
  • This transaction will enable the enterprise to compete more aggressively with larger rivals such as Accenture by adding engineering and R&D services to Capgemini’s core IT consulting offer.

French IT Services Consolidation

  • This acquisition aligns with existing trends of gaining a greater presence in foreign markets and marquee clients. With Altran, Capgemini will have an increased market presence in the US, Eastern Europe, and India.
  • Notably, in April 2015, Capgemini agreed to acquire US-based iGate for $4 billion from Apax Partners as a strategy to increase its US presence. Apax Partners was also an investor of Altran.
  • On a larger scale, digital transformation companies are competing for dominance and positioning themselves to capitalize on the “fourth industrial revolution” as cloud computing, AI/ML, IoT and 5G continue to advance.
  • This trend, along with a slowdown in European economic growth prompting the ECB to potentially cut interest rates, has led to widespread consolidation across the EU.
  • Five months prior, DXC announced its acquisition of Luxoft Holding, a Switzerland-based digital strategy and engineering services company for $2 billion in January 2019. Atos, a major France-based IT services provider announced its $3.6 billion acquisition of Syntel in July 2018.
  • Evidently, the past few years have been an arms race for industry leaders to assert and rebrand themselves as the top digital transformation services providers.

Capgemini and Altran’s Aligned Inorganic US Expansion Strategy

  • The acquisition of Altran was followed by a series of US-based acquisition announcements, including cyber security solutions provider Leidos Cyber in June 2018, CRM solutions provider LiquidHub in February 2018, and IT consulting services provider Lyons Consulting Group in September 2017.
  • Lyons CG is a direct competitor of OSF Commerce, who received a $23m equity round from Delta-v Capital and Salesforce Ventures in April 2019. True Blue Partners was the exclusive financial advisor to OSF Commerce.
  • Similarly, Altran announced its acquisition of US-based Aricent from KKR & Co for $2 billion in November 2017. Months after the announcement, Altran’s shares collapsed after the group revealed a forgery of orders in Aricent.
  • Capgemini took advantage of the opportunity and acquired Altran at a bargain before the overall damage had been fully recovered. While the transaction was priced at a 22% premium on the last closing price, the premium reflects an aligned strategy, new revenue generation and cost savings of the combined entity.

Capgemini Transaction History

Capgemini Transaction History table

About True Blue Partners, LLC
True Blue Partners is a boutique M&A advisory firm that serves lower mid-market enterprise software, service and solutions companies. It brings the rigorous strategic and financial perspective of bulge bracket firms with a company building approach and a steadfast partnership that only an independent boutique firm can deliver. For more information please visit www.truebluepartners.com or email us at info @ truebluepartners . com.

TBP was NOT an advisor to this transaction.