Wipro makes its biggest acquisition ever with $1.45bn takeover

Indian IT services giant Wipro will acquire global management and technology consultancy company Capco to strengthen its international financial services digital transformation.

The $1.45bn takeovers of 20-year old Capco, which is headquartered in London, will add financial services consultancy to Wipro’s digital expertise at a time when digital transformation is accelerating. It also means Wipro will take on 5,000 additional staff in 30 locations across the world.

Thierry Delaporte, recently appointed CEO at Wipro, said the deal would help it “deliver high-end consulting, technology transformations and operations offerings to our clients”.

Lance Levy, CEO of Capco, echoed Delaporte on the benefits of the companies’ combined strengths. “Together, we will offer bespoke transformational end-to-end solutions, now powered by innovative technology at scale, to create a new leading partner to the financial services industry,” he said.

In the post-Covid-19 period, enterprises plan to accelerate digital transformation. Lessons learned during the pandemic have taught them the importance of operating remotely and providing digital services where required. Financial services firms also have to ensure they transform their customer services as customers increasingly move online.

Peter Schumacher, CEO of management consultancy The Value Leadership Group, said the significant acquisition reflected changes introduced by Delaporte, who became Wipro CEO in July 2020.

“Many of Wipro’s past acquisitions have failed and it’s no surprise many financial analysts and other industry experts are sceptical that this deal will deliver the synergies and earnings growth Wipro has promised”

Peter Schumacher, The Value Leadership Group

He said the significant acquisition he would have expected from one of the larger Indian suppliers, Cognizant or Infosys, but not Wipro. “Delaporte’s initiatives reflect that he is not only trying to make Wipro faster and more agile by simplifying and decluttering the company’s bureaucracy but, more importantly, he is also trying to differentiate Wipro by adding and developing new capabilities,” he said.

Schumacher said it was a significant gamble, however. “Many of Wipro’s past acquisitions have failed, and it’s no surprise many financial analysts and other industry experts are skeptical that this deal will deliver the synergies and earnings growth Wipro has promised,” he said.

He posed the question of whether Wipro was “overstepping its ability to manage all of these major activities in parallel” and “bitten off more than it can chew”.

Schumacher added that Wipro, like many large India-based IT services companies, is cash-rich and eager to strengthen its market position further.

Several Indian IT services companies, including Wipro, have also been expanding their capabilities through the takeover of customer operations. Some seizures have also supported the cost-cutting plans of customers.

In December 2020, Wipro took over the IT units and 1,300 employees of German wholesaler Metro as part of an IT outsourcing deal worth up to $1bn (£745m) over nine years. The Indian supplier will pay £36m for the unit, giving it additional IT staff in Germany, Romania, and India.

Meanwhile, late last year, Tata Consultancy Services (TCS) acquired the staff and some of the assets of an IT operation of Prudential Financial as the US insurance company for free. This followed the company’s €1 takeover of the IT unit of Postbank from Deutsche Bank.

Although the acquisitions were for token amounts, the acquirers take on the operating costs.