Rating company Crisil Ltd has agreed to acquire UK-based analytics firm Coalition Development Ltd , along with its subsidiaries, for about £29 million (Rs. 250 crore). Coalition will become a part of the Crisil’s Global Research and Analytics business. “The acquisition allows us to expand our offerings to very high analytics and proprietary research. It enables us to deepen relationship with existing clients and add new clients,” Roopa Kudva, Crisil’s managing director and chief executive officer, told DNA Money.
Currently, Crisil’s Global Research & Analytics business provides equity research, fixed income research and even risk analytics for exotic derivatives trading and operates from centres in Argentina, China, India, and Poland. Coalition could look at offering analytics in these emerging markets, she said.
“The target segment for both is investment banks. But within investment banks, Coalition’s customers tend to be top management and strategy department. Whereas Crisil’s existing customers in investment banks are more research and trading desk,” Kudva said.
The transaction value will be paid out over two years depending on the achievement of future revenue growth and profit growth of the British firm. So if the growth numbers are lower than envisaged, then the deal size will come down, Kudva said.
Coalition has 130 employees, who will continue as Crisil workforce. “We feel Coalition is a brand acquiring greater recognition in the markets. Therefore, we have no plans to discontinue it. The management team is led by Trevor Foster-Black is committed to staying on and they will continue to lead the company,” Kudva said.
In 2010, Crisil had acquired US-based knowledge process outsourcing (KPO) firm Pipal Research Corp. from Firstsource Solutions for $12.75 million. Mape Advisory Group was the adviser to Crisil on the purchase of Coalition.
Experts say Indian purchases of European firms are rising as businesses are available at cheaper valuations, making it easier for cash-rich firms to bargain at a time when Europe is struggling with a sovereign debt crisis. These acquisitions give Indian companies access to new markets, innovative technologies and a mechanism to spread risk through geographical diversification.
The overseas acquisitions, however, tend to face integration issues, cautioned Sunil Goyal, managing director and chief executive, Ladderup Corporate Advisory Pvt. Ltd, an investment bank. “Integration challenges can disrupt businesses. Indian companies need to reduce the integration timeframes which can even take two to three years,” he said. “The outbound deals are on a rise and will continue to be so.”
Harish H.V., partner, India leadership team, at accounting and advisory Grant Thornton India, said while Indian companies will be acquisitive in Europe, there would not be many large-ticket deals (above $1 billion). “These would mostly be sub-$300 million deals and the most preferred sectors would be pharma, auto components and technology,” he said.
Last year saw 644 India-related M&A deals worth $44.61 billion, including 142 inbound deals in which foreign firms acquired businesses in India worth $28.73 billion. In 146 outbound transactions, Indian firms bought businesses abroad in deals worth $10.84 billion, according to Grant Thornton India’s estimates.
The deal needs approval from Sebi, which is expected this quarter.