Wipro makes surprise acquisition. Acquires a CAD/PLM data integration specialist

/ June 5, 2019/ India, M&As (small under $50m in revenues), PLM, US, Wipro

We had to look back into our database to identify when Wipro had, for the last time, acquired an ER&D service vendor. In 2005-2006, Wipro acquired three ER&D services (Saraware, NewLogic, and Quantec) around semi-conductors and PLM services. And then, nothing for the following thirteen years.

Wipro will be paying USD 45m in cash for a software and services firm headquartered in Miford, OH, name International TechneGroup Incorporated (ITI). ITI is specialized in data interoperability and migration across CAD and PLM software products. ITI is a small firm with USD 23.2m in revenues in FY18 (the year ending June 30) and a headcount of 130. ITI has enjoyed decent growth ranging from 5% to 11% in the past three years.

More than anything, ITI brings to Wipro quite a number of IP (i.e., software products) all centered around data migration and application integration across CAD, PLM and ERP applications. Wipro will consolidate ITI within its Industrial & Engineering Services unit. It expects to close the acquisition in Q2 FY20 (Q3 2019).

45 million dollars seems quite a large sum of money for a moderately-growing firm. Wipro will be looking at selling the IP of ITI across its client base, and get high margins from its product sales.

Wipro’s renewed interest in ER&D services is a surprise. The company derived in 2018 approximately USD 590m in revenues from its Industrial & Engineering Services unit. Wipro has been growing, surprisingly, only mildly in this unit and in the preceding units since FY13. Wipro seems to be ready to accelerate the transformation of Industrial & Engineering Services, with a very specialized acquisition. This is good news.