Infotech went public in April 1997, giving us the financial muscle to take a few bold steps. After battling business limitations with the partnership model, we started exploring the acquisition route to gain a geographic footprint and get closer to the customer. Once we had set up office in the US, Europe was our next logical growth market, and the UK the obvious beachhead. Several eyebrows went up as we started looking to acquire companies internationally. In those days, it was unusual for an Indian company of our size to buy companies in the West, and especially in the UK.
When Transition Partners Ltd, a boutique American investment banking firm, got in touch with me with an exciting proposal, I dove deep into it. The company on offer was the UK-based Dataview Solutions. Dataview was into business geographics and its primary area of focus was geodemographic analysis. It was a small outfit, working out of a single office with an employee strength of around twenty-five professionals. Its business profile attracted me as it was engaged in designing, developing, marketing, licensing and supporting software products, application development tools and data products in the European geospatial market. It had customers in banking, telecom and retail. Geoff Kendall, who had founded Dataview in London in 1992 and the other major shareholder, John Kendall, were looking for an exit option as Geoff planned to move back to his native Australia.
We studied Dataview’s investment memorandum, projects and customers and tried to understand the business through multiple conversations with the senior management team. I studied their numbers and found that the firm was profitable, growing and debt-free. It had a reputed customer base, a well-laid out management structure and ticked most of the significant boxes for me. After several discussions over the phone, I said, ‘I can come and see you next week in London.’ The reaction on the other side, I was to find out later, was, ‘Wow, this guy is going to come all the way to London to see us.’
I met the team in London in early 1999 and held a series of discussions with them – all of them promising. It was time to take a decision. Would it be an aye or a nay? I gave serious thought to the offer on the table. Dataview’s expertise and its work with customers such as British Telecom, NatWest and Orange was impressive. With Infotech’s strengths and scale and Dataview’s clientele, I believed our synergies could pull off a lot more. We foresaw an explosion of capabilities and scale when we cross-sold our data and software services to existing customers.
Another major plus was Dataview’s vastly capable leadership team. I was personally impressed with its general manager, John Renard. John bought into the transaction and agreed to stay on. He holds a senior leadership position at the company today. I viewed him as a great addition to the management. Geoff, who had been involved in the actual running of the business, sweetened the deal even further, by agreeing to remain in the company for another two years.
John later told me that when the sale process started, Dataview expected that either another UK company or a US company looking for a European bridgehead would buy it. Infotech was late to the
process and Dataview already had two other offers. However, it quickly became clear that I had really taken the time to understand the business and my willingness to come and visit the firm at such short notice tipped the scales in our favour. Infotech became the company’s preferred bidder. But there were still a few hiccups lurking round the corner.
At the fag end of the deal, Geoff Kendall and family suddenly went silent, giving me a lot of anxious moments. Gene and Terry, the peerless duo from Transition Partners, stepped in and calmed me down, explaining the phenomenon as the ‘lost dog syndrome’. ‘You’ll occasionally find dogs running astray and competing with cars on roads. They catch up with the vehicle but end up losing breath. At this point, the dog is lost,’ they told me. ‘The Kendalls,’ they explained, ‘have got what they wanted and they’re probably feeling a bit lost at the moment. Give them time, they’ll be back.’ And they were – much to my relief.
We concluded the acquisition and made the announcement in August 1999. It was a small takeover but an important one. For a company of Infotech’s size (Rs 22.10 crore/$5.26 million revenue in FY1999), acquiring an overseas company like Dataview for Rs 7.60 crore/$1.8 million in cash and another Rs 7.60 crore /$1.8 million in stock to be earned in two years was a bold move for an Indian IT firm.
It was a challenging cross-border transaction what with Transition being based in Boulder, Colorado, Dataview in London and Infotech in Hyderabad. However, with a shared focus that hinged on a successful outcome, the transaction was completed in a relatively short time.
A small aside: the takeover almost did not happen because both sets of lawyers forgot to include the cost of the international funds transfer into their final calculations – a tiny amount compared to the purchase price – but a potential problem, nevertheless. Fortunately, it was a time when people still carried cash and we were able to cough up the necessary money and put it on the table. The transaction took place as planned.
The acquisition helped us to insulate ourselves from the negative impact of the US economic slowdown when the dot-com bubble burst at the turn of the millennium. Our revenues stood at Rs 160 crore ($33.32 million) in FY2003, reflecting the steady European revenue growth post the Dataview acquisition, offsetting the US slowdown of 2002. The acquisition also impacted our engineering services business positively.
Initially, Dataview was apprehensive about working with a much larger group (Infotech had 850 people) but everyone, barring one mid-level manager, stayed back. We used the words ‘acquisition’ and ‘merger’ interchangeably in internal communications to soften their anxiety. Our effort to integrate the operations and cultures of both outfits paid off; employees at Dataview set aside their disquiet and settled down. They started to understand the projects and type of work that best suited Infotech and focused on the opportunity that was blossoming. Culturally we were quite different, yet our values were very similar.
This acted as a unifier and helped us to concentrate on the bigger picture and work towards our common goals. There were the inevitable mistakes in the early days, but perseveranceand a willingness to learn from each other helped us overcome the obvious challenges of culture and lack of proximity. A passion for, and expertise in, all things geospatial definitely helped.
Excerpted with permission from Engineered in India: From Dreams to Building Billion-Dollar Cyient, BVR Mohan Reddy, Penguin.