Recently, Europe's biggest information technology (IT) consulting firm, Cap Gemini SA, agreed to pay $1.25 billion for KanbayInternational
Founded in 1989, Kanbay focuses its IT consulting primarily on the financial services industry, with clients like HSBC
Kanbay has also built its business on a so-called "three-tier global delivery model." This means providing services at three touch points: a relationship management team at the client's location; an offsite team of technology and financial industry experts in a regional delivery center; and an application and support team at centers in India (there are roughly 5,000 employees in India). With this approach, Kanbay provides better customer service and more responsiveness, but also gains from cost savings.
While these are strong assets, the fact is that the buyout is still hefty. Using Kanbay's full-year revenue guidance, the valuation of the acquisition is roughly 3 times sales.
However, big IT players -- such as IBM
OK, so who else may be in play for a buyout?
I interviewed Brad Adams, who is a managing director at Boston Corporate Finance, and he thinks that Keane
Of course, it's not a good idea to purchase stock based solely on buyout speculation. And in Keane's case, the company has experienced recent turmoil in the boardroom, as its CEO departed on allegations of sexual harassment.
Yet at the current valuation, there does not appear to be a buyout premium already priced in. That is, the company's stock is selling at only 0.7 times revenues. That's a pretty good price for a company with a stable customer base, a global delivery platform, and a sizeable presence in India.
In fact, at these levels, there is probably much motivation for Keane's management to improve the stock price, especially in light of the premium valuation for Kanbay.
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