You are on page 1of 12

Acquisition Of Axon

By
HCL Technologies Ltd.

Group 3
Content
•About HCL
•Introduction Of Axon
•Global SAP Market
•Strategy of HCL to acquire Axon
•Pros & Cons of Acquisition
HCL Technologies Ltd.
• Founded in 1976,HCL Enterprises, also known as Hindustan Computers
Ltd. earlier, was started by Nadar with some other Engineers.
• The company was Credited with developing India’s First Microcomputer.
• In 1979, with the strategy of International Expansion, HCL formed Venture
in Singapore Called Far East Computers , which started selling Both
Hardware as Well as Software, and service & Packaged it and presented it
as computerisation.
• In 1986, HCL Enterprises had emerged as the Largest Hardware Company
in India and formed Joint Venture with HP in 1991 for Developing a
multiprocessor for HP.
• In 1997 HCL Entered in Software Services
• In 2008, HCL reported revenues of Rs.75,627.80 Million, a 37.8%
year-on-year growth and net income of Rs.10,514.10 million
Contd.
• AS of 2009, HCL had a presence in 19 Countries with
52,714 employees and offered its services to various
industries like Aerospace & Defence,Automotive,
Energies & Utilities, Financial Services Government,
Life Sciences & Health care, Manufacturing,
Media & Entertainment , Retail & CPG,Telecom,Travel,
Transportation & Logistics.
HCL Technologies -Financial Highlights
(in million Rs.) 2008 2007 2006 2005

Total revenues 75,627.80 60,687.40 45,715.80 33,512.00


Cost Of Goods sold 45,020.40 38 26,669.70 20,519.40
Gross Profit 30,607.40 24,638.50 19,06.10 12,920.60
Other Expenses 17,627.20 14,829.40 11,063.10 5,952.10
Operating Income 12,980.20 9809.10 7983.00 6968.50
Net Interest Expense 559.2 181.1 35.8 349.6
Ebt, Excluding Unusual Items 10,702.00 13,491.20 7246.40 6659.90

Ebt, Including Unusual Items 11,828.60 14,279.50 7483.10 7150.20


Income Tax Expense 1290.30 1040.80 558.9 498
Minority Interest In Earnings -24.2 -55.6 -17.5 -465

Earnings From Continuing 10,514,10 13,183.10 6,906.70 6,187.20


Operations
Net Income 10,514.10 13,183.10 6,906.70 6,187.20
Axon Group
• Headquartered in Egham, Surrey, the Axom Group was founded by Mark Hunter, Donald
Kirkwood, and Paul Manweiler in 1994.
• The Group Primarily offered SAP consulting to many multinational
corporations that used SAP as their strategic enterprise platform.
• Some Of the Group’s Major Client included BP, Kraft foods, Vodafone and Xerox.
• Axon’s services were spread mainly over three Domains- Business
Consulting, Solutions Implementation and Business Management.
• Axon was listed on the London Stock Exchange in March 1999 with a valuation of 100
million.
• In October 2001, Axon acquired Bywater Limited, a leading business
consulting firm for 7 million.
• In April 2005, Axon acquired Feanix Corporation , a leading consultancy based in the
US, to strengthen its position in the country.
• In May 2008, Axon acquired another US- Based Consultancy, EnterSys Group LP, which
offered services to the Oil Gas & Chemical sector in North America.
Axon –Financial Highlights
(In Euro 000) 2008 2007

Revenue 123,933 96,669

Total Cost Of Goods 93,998 69,898

Gross Profit 29,935 27,710

Operating Profit 16,546 13,847

Profit For the Period 10,823 8,406

Earnings Per Share 17.9 pence 14.2 Pence


Global SAP Market
• SAP was Started In Germany in 1970 with the aiming of
developing standard application software for real-time business
business processing. Over the Years SAP Developed into one of
the most popular Enterprise Resource Planning software.
As of Early 2009,there were Five Types of Enterprise Application
Available in SAP’s Business Suite :
1. Customer Relationship Management (CRM)
2. Product Lifecycle Management (PLM)
3. Supply Chain Management (SCM)
4. Supplier Relationship Management (SRM)
5. Enterprise Resource Planning (ERP)
The Deal

• HCL Started negotiations for The acquisition deal in July 2008. Axon, at that Time,was negotiating the deal simultaneously with
both HCL and another IT major,Infosys Technologies Ltd.
• On Aug 25,2008, it was Infosys, which first made an offer to acquire
Axon for Euro 407 Million at 600 pence per share of Axon.
• On Sep 26, 2008, HCL, in an attempt to outbid Infosys offer,made a counter
offer worth 441 million in cash for the acquisition of Axon.With the Bid, HCL offered
650 pence in cash for each share Axon..
• Shortly after HCL ‘s counter bid ,Axon released a statement in which it gave Infosys about 60 hours to come up with a new offer.
• On Not receiving Bid from the Infosys in the stipulated period, Axon Withdrew its earlier recommendation for infosys, and
decided to go ahead with the HCL offer.
• On Nov 24, 2008, Axon’s shareholders approved the acquisition deal with HCL in an extraordinary general meeting.
• By December 15,2008, HCL had completed all the formalities relating to the acquisition of Axon.The new entity after the
acquisition was called HCL AXON.
The Benefits
•HCL was aiming to become one of the most valuable brands in the
world by 2010, the acquisition of axon was a decision in this
direction.
•With acquisition of Axon, HCL emerged as a leading firm in the
EAS business, which was considered a growing area for IT service
firms.
• Axon had gained expertise in delivering SAP enabled business
solutions and it offered consultancy services to leading
multinational companies in a no. of countries.
•Analysts also said that with the acquisition deal, HCL might
emerge as a prominent player even in India, where there are huge
demand for SAP applications in may sectors like defence,railways
and telecom.
The Drawbacks
• The Deal was not welcomed by its share holders. HCL’s share prices
witnessed a sharp fall after the deal was announced.
• According to Anagram Stock Breaking House, it was not prudent
decision for HCL to enter the European market with a view to expanding its
geographical presence as the UK market was likely
to be more impacted than the U.S. in Future.
• The timing of the HCL Axon deal was also not considered appropriate due the
fact that most of the outsourcing clients
for the Indian IT companies in the US and UK market were cutting down on
their IT budget due to economic slowdown.
• According to the Emkay, the Poor macro environment could cause negative
impact on Axon’s business dealings, which could show up in HCL’s future
financial performance.
HCL’s Point of View
• HCL was confident of the synergies which it could reap from the
Axon deal .It justified the price of 650 pence per share by
mentioning that Axon was one the few large companies in the world
operating mainly in the SAP business.
• HCL considered the management of Axon as a very efficient system
with good customers, as well as complementing services.
• The Global SAP partnership was taken as a very significant step for
achieving competitive advantage over other IT companies.

You might also like