Capgemini to target Acquisitions in US

Date: 25-02-2008
Source: Financial Times

Capgemini, Europe's largest computer consultancy, is looking to make small acquisitions in the US to bolster its consulting businesses, according to Paul Hermelin, its chief executive.

"With Dollars 2.5bn in revenues, we are a sizeable player but not a tier-one player in the US. We have a portfolio of strengths but could gain from adding a few others," Mr Hermelin told the Financial Times. As the dollar weakens, and the US economy slows, this could be a good time to make purchases, he said. "However, easy integration will be prioritised. We will not do anything big," he said.

Mr Hermelin is still shaken by the experience of acquiring Ernst & Young's consulting business in 2000. He was one of the architects of the deal, but now admits it was "not the right acquisition at the right time", taking far longer to integrate than expected.

Although he plans to expand through acquisitions, Mr Hermelin said he would also accelerate restructuring plans, because of the "risk of a downturn in the US is now so tangible". Capgemini has been transforming into a heavily Indian-staffed IT offshoring company, in order to compete with Indian competitors such as Wipro, Infosys and TCS.

Mr Hermelin has set a goal of having 45,000 of the company's 84,000 staff based in India by 2010. It had 20,000 Indian staff at the end of 2007, and was set to reach 28,000 by the end of 2008. "Any slowdown will increase that target. Customers will be more accepting of offshore work, as they continue to require support but become more conscious of cost," he said.

Eventually, Mr Hermelin said, just 20 per cent of the company's staff might be based in Europe and the US, with 80 per cent in lower-cost locations. However, he warned that this could cause "political tension". Western countries have grown concerned about losing skilled jobs to emerging economies such as India and China.