M&A in technology services?

M&A activity in and out of India is on the rise. Business journals are predicting that Indian companies will be in action this year in the M&A seen. TATA Corus, Possible Vodafone-Hutch, Ranbaxy-Merck Generics and now an India conglomarte wanting to buy Novelis, the fingers in thew two hands are going to be limited to count o of mergers with for the first time ever.

Surprising India’s core offering sector has not seen a lot of action yet. Yes I’m talking about Technology services. This industry has not seen that much of action yet…

What’s going on? Don’t they have resources and/or will to buy-merge and consolidate, of course answer is NO that is not the case. Wipro has shown that. But nothing big is seen in this arena. What’s going on?

So what is it that’s stopping IBM to buy HCL or Infosys to go merge with EDS, CSC. It sounds like a naturalistic synergy in terms of client acquisition, skill acquisition and moving down or up the value chain.

While there are few buyouts EDS-Mphesis and Canbay buy out, there are reasons the less M&A is seen in this industry.

My hypothesis for the reasons …

1. cultural (people) integration issue
2. No tangible assets
3. people can leave and not be owned
4. low entry barrier to the industry (build / buy )
5. innovations driven industry
6. too many cash rich competitors may want same target (if not friendly) – prisoner’s dilemma

While these issues exists, they may not exist for long time. It may not be too long before we see action in India technology services industry.