SemanticSpace to buy NY co for $30 mn

BANGALORE: There���s a momentum building up in smaller IT companies going for overseas acquisitions. The latest to join the race is Hyderabad-based SemanticSpace Technologies, a 1,200-people software services player, which is close to acquiring US-based JYACC Inc for nearly $30 million. New York-headquartered JYACC is an end-to-end systems integration company known by its trademark Prolifics, specializing in IBM technologies. Sources close to the company said, the deal-making was in advanced stages and a closure could be achieved in the next few weeks.

Mid-tier IT companies like NIIT Technologies, Mastek and 3i Infotech have inked overseas deals in the recent past with industry experts predicting smaller Indian firms going for international buyouts in the $20-100 million bracket. Mastek acquired US-based STG for $30 million, while NIIT swooped down on German company SoftTec. A few weeks back, 3I unveiled $80-million buyout of US-based payment pocessing firm Regulus Group.

SemanticSpace, which is projected to report revenue of $25-30 million in the ongoing financial year, will add about 150-200 overseas employees through the latest acquisition, which is incidentally the company���s second buyout in the US, sources added. It is believed that the upfront cash payout may be around $10-15 million, while the rest may be in the fom of ���earn-outs���. However, officially, the company denied the development terming it a rumour.

According to industry trackers, the recessionary trends in the US may actually translate into some of the assets becoming cheaper for acquisition by Indian companies. In fact, many reckon that these low valuations could be a trigger for increased M&A activity by Indian IT services companies, looking at bridging competency gaps in domain, skillsets and market access. Sources said, valuation of US technology firms were curently hovering at 3-5x times on EBITDA making synergistic targets look attractive on the deal street.

SemanticSpace, which has its offshore development centre in Hyderabad and sales offices in the US, provides product engineering services, enterprise solutions, packaged application implementation, testing and staff augmentation services. The company, in which UTI Ventures is an investor, confirmed that it was on M&A prowl.

���Size does matter. We are looking at acquisitions to grow bigger,��� an official said. In line with this strategy, SemanticSpace recently acquired Silicon Valley firm Arsin Corporation, which has a strong SAP business practise. Arsin offers SAP business process testing and markets a SAP regression test library and various other SAP testing solutions to reduce the time to solution.

SemanticSpace too has created intelluctual property around its project management and quality testing suites. These IPs help Semantic to reduce the time to market and cost for its clients.