This week’s news that caught my thinking is Mindtree’s acquisition of Aztechsoft. On paper, it looks like a good deal in terms of money Mindtree will spend to acquire. Also, from strategic point of view, it might help Mindtree to gain that extra mile it wanted. Analysts believe, this is merger of synergies.
It is true, Mindtree has a target of meeting 1 billion in revenue and it wanted a portfolio in product development area. Off course this acquisition serves that purpose.
Since I am a small time investor in Mindtree, I would naturally want their top line to grow. But, the question that came to my mind is; is this start of consolidation in Mid-tier services companies in IT sector?
With rupee appreciation, challenging global conditions, stiff competition from global companies; are few points why doing business looks difficult for mid/small companies. I am not entirely ruling out a possibility of running the business in spite of these conditions. But the overall condition seems to be real challenging.
This kind of consolidation is quite natural and it is phenomenon across all industries. I remember my MBA professor telling about “Rule of consolidation”. It seems, in all the sectors, the consolidation happens and 3 or 4 big players will control the entire business there after. I remember him quoting American Airline Industry, American Retail industry, American Pharmacy industry. And surprisingly this rules sounds sense!
Off course I am not of the opinion that there will be only 3 or 4 companies in IT sector. But, the question I am raising is, is this beginning of consolidation? Where slightly bigger player will acquire smaller companies? Or is it just one-of-those cases?
I believe, we need to watch this mid-tier sector very closely and I am sure there will be surprises! Who knows?
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