Geometric acquires US-based design division for $25 mn
Mumbai-based software services company Geometric Software Solutions has acquired engineering services division of the US-based Modern Engineering. The total enterprise value is $25m.
By TNN |
MUMBAI: Mumbai-based software services company Geometric Software Solutions has acquired engineering services division of the US-based Modern Engineering. The total enterprise value is $25m.
The acquired division has recorded revenues of $40m for the current year. ET had reported on Wednesday about Geometric’s overseas acquisition.
Geometric plans to fund the acquisition through a combination of internal accruals, funding from ICICI Venture and debt in the US. Around $10m would be used from the preferential placement that the company had made to ICICI Venture earlier this year.
The company also borrowing $12.5m from the US market through its subsidiary to fund the acquisition. The remaining $2.5m will be funded through internal accruals. Geometric has decided to take over the short-term liabilities of $7m for which it is raising a working capital loan.
At present, Geometric will acquire 95% stake in the engineering desing company and the remaining 5% will be held by the existing management of Modern Engineering. Geometric will buy this 5% equity after a year at a valuation based on revenues and other deliverable by the management team.
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Modern Engineering derives a bulk of its revenues from its staffing business. It supplies high-end engineering talent to companies in the auto and design area. The division acquired by Geometric is a smaller business that provides manufacturing engineering design services to auto majors such as General Motors and Daimler Chrysler. Commenting on the acquisition Geometric’s CEO, Ravi Gopinath said: "We will have end-to-end capability now. We are strong in product life cycle management and product design, while Modern is strong on the manufacturing engineering side."
Company sources said that though the new acquisition will add only marginally to the bottomline, the real gains will only start flowing in from next year onwards.
Manu Parpia, executive director, Geometric said: “Besides adding to our capability, we will also get a global footprint for our offshore service both in Romania and China.” Geometric has staff strength of 1,900, of which around 150 are employed in the engineering design space.
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The acquisition will boost its strength in the engineering design space by another 500 employees outside India. The short-term objective for Geometric will be to sell its offshore product design services to Modern’s clients like General Motors and Daimler Chrysler. Modern will also start selling its engineering services to Geometric’s client base. In the medium and long term, Geometric is looking at expanding its service offering to other segments like Aerospace.
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