Acquisition of Axon by HCL Technologies Limited
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Case Code: BSTR321 Case Length: 17 Pages Period: 2008 Pub Date: 2009 Teaching Note: Not Available |
Price: Rs.300 Organization: HCL Technologies Limited, AXON Group Plc. Industry: Information Technology Countries: India/UK Themes: Mergers & Acquitions |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
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 Indian IT major, Infosys Technologies Limited (Infosys). On August 25, 2008, it was Infosys, which first made an offer to acquire Axon for £ 407 million at 600 pence per share of Axon. Infosys claimed that the price it was offering was a premium of 19.4% over the share price dated August 22, 2008, at 502.5 pence per share. Infosys seemed quite confident of its offer and said that it had the support of the management team of Axon as well.
Roy Merritt, Non Executive Chairman, Axon, commenting on the Infosys offer, said, "The Board has taken the decision to recommend the acquisition by Infosys after careful consideration. Axon has successfully implemented its strategy to become one of the largest consultancies in the world focused exclusively on SAP and has generated a significant increase in shareholder value over the past five years...
The Benefits
In September 2008, Nayar said that HCL was aiming to become one of the most valuable brands in the world by 2010. The company planned to take some strategic decisions between 2008 and 2010 that would act as growth accelerators for it. The acquisition of Axon was a decision in this direction...
The Drawbacks
Though several analysts highlighted many positive aspects of the deal, there were a good number of analysts who were not in favor of it. For instance, the deal was not welcomed by HCL's shareholders. HCL's share prices witnessed a sharp fall after the deal was announced...
Exhibits
Exhibit I: HCL Technologies - Business Lines
Exhibit II: HCL Technologies - Financial Highlights (2005-08)
Exhibit III: Axon - Financial Highlights
Exhibit IV: Axon Share Price (February 2008 - January 2009)
Exhibit V: HCL's Service Offering Mix: Contribution to the Revenues
Exhibit VI: Global SAP Market
Exhibit VII: HCL - Stock Price Chart (February 2008 - January 2009)
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