vGlobalLogic closes in on R&D unit of foreign co

MUMBAI: GlobalLogic, the US-headquartered outsourced product development (OPD) firm which acquired the Nagpur-based Lambent Technologies last year, is set to acquire the India-based R&D unit of an overseas firm. The acquisition will happen through the TOB route, a new model that is emerging for such companies. The TOB model, or the transfer-operate-build model, is the reverse of the BOT (build-operate-transfer model.

In the TOB model, a company transfers its captive unit or division to another company for a small upfront payment. The acquiring company takes over the operations and employees of the captive and runs the operations. The two firms also sign a contract which guarantees a fixed level of business to captive, translating into revenues for the acquiring firm.

For the firm which transfers its ownership, the transfer usually means greater efficiencies and cost savings, and for the acquiring firm, a ready pool of trained manpower and a new revenue stream. The acquiring firm then builds up capacity to service other clients. For the product company, the added advantage is they can have more people even for short durations depending on the requirement of the product or solution.

GlobalLogic CEO Peter Harrison declined to give any details of the transaction saying the announcement was yet to be made. The company has already completed two such TOB transactions in the past. In January 2006, it acquired the captive unit of Mantas, which provides solutions to address risk and regulatory requirements in anti-money laundering, trading and broker compliance. Mantas was later acquired by I-flex Solutions and GlobalLogic now does outsourced product development for i-flex.

In 2006, GlobalLogic also acquired the captive R&D unit of Praedea Solutions Inc, an enterprise software solutions firm providing semi-automated data extraction from financial statements and other unstructured documents.