GlobalLogic Aiming to Triple Revenues by 2022

/ November 24, 2018/ 9 ISVs, Automotive, GlobalLogic, India, Investor Update, M&A (large, with revenues above $50m), M&As (small under $50m in revenues), News, Technology, Unknown, US

In an interview with Indian business paper the Economic Times, GlobalLogic expressed its intentions to reach USD 2bn in revenues by 2022. GlobalLogic will reach revenues of USD 650m this year (assumed to be FY19, ending March 31, 2019). The company is on a momentum and is expecting a 24% organic growth this year. GlobalLogic wants to acquire USD 1bn in revenues and is looking for firms active in cybersecurity, retail/CPG, MedTech, and automotive. Targets will have revenues in the range of USD 60m-USD 250m.

PE firm, Partners Group acquired a 48% stake in GlobalLogic in May 2018, for one USD 1bn, from Apax Partners. It now wants to scale up GlobalLogic and probably will resell its stake in three or five years. The growth ambitions of GlobalLogic are therefore not a surprise.

The surprise lies more in the scale of the numbers and the targets. USD 1bn in revenues is a large number, and it signals that GlobalLogic will have an intense M&A activity. It is hard to estimate how much GlobalLogic will spend in total, as this depends on the profitability and revenue growth level of the acquired firms. Still, GlobalLogic will have to spend anywhere between USD 750m and USD 3bn for meeting its USD 1bn revenue objective. This is a significant amount.

GlobaLogic is a vendor aligned towards high tech and commerce (~30% of revenues), and a has a limited presence in automotive (~15% of revenues). GlobalLogic is looking to strenthen its presence in commerce and grow in automotive, where it is under-scaled. The focus on retail and CPG suggests however that GlobalLogic will move towards IT services.

The ER&D services market is currently buoyant and will remain so in 2019. However, it is now at its peak level. A crash seems probably from 2020 onwards, although, it is, of course, impossible to predict when exactly. PE firms with big ambitions such as Partners Group need to act fast on their scale-up strategy, before the market slows down considerably and exit conditions get depressed. With this mind, the three- to four-year window that GlobalLogic has set for itself seems a bit optimistic.

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