Tech Mahindra acquires Satyam

Finally, the ordeal of Satyam will see some interim light with TechMahindra deciding to acquire the beleaguered IT firm for close to Rs 2890 crore (USD ~750 m). For Satyam, this will definitely be a high-point as the company was faced with significant shortage of capital, declining investor confidence, high attrition and a falling brand image. TechMahindra will initially acquire 31% of Satyam at Rs 58 (~USD 1.1) per share. Tech has also announced its intention of acquiring an additional 20% of Satyam shares from the open market.

What does Tech gain by this deal?

• Service diversification: From being a predominant telecom IT services player, tech can now boast of having capability across multiple new sectors like Aviation, Automotive, Energy and Utilities, Financial services to name a few.
• Cheap Asset: Tech will acquire 51% of Satyam for close to Rs 2890 crore, which is a decent amount considering that asset prices are currently significantly lower than what they were during their peaks. Also considering softer factors like the Satyam brand, acquisition of ready-made talent, etc makes the deal a good buy.
• Good brand image: Satyam was considered as an epitome symbolising the rise of the IT sector in India along with Infosys, TCS and Wipro. Due to the unfortunate deeds of Mr Ramalinga Raju, the company was almost at the brink of bankruptcy, if the government had not intervened at the right time. By acquiring Satyam, Tech has not only won laurals from the public but I am also sure the company has become a "good boy" in the eyes of SEBI, governments and the industry in general.

Satyam employees though overjoyed by this interim breadth of fresh air are cautious to sound their concerns about impending downsizing. Considering that some large accounts have withdrawn or abruptly ended their contracts with Satyam, some teams might face the axe sooner or later.

The Satyam incident has managed to bring out the swift action taken by the Indian government. As the saga unfolded and the world watched, I can only say that the government has done a commendable job.