Tech Mahindra to acquire UK-based BpaaS company Target Group

Aiming to further strengthen its presence in banking and financial services, software services firm Tech Mahindra is all set to acquire UK-based business-process-as-a-service (BpaaS), Target Group, in a deal of around £120 million.

Target Group provides offerings to financial institutions such as Goldman Sachs, Morgan Stanley, and Credit Suisse.
Tech Mahindra said in a statement. “The 100 percent acquisition strengthens Tech Mahindra’s BFSI practice by access to IP and a platform which helps automate end-to-end processes in the lending, investments, and insurance market.”

The acquisition strengthens Tech Mahindra’s presence in the UK’s financial services industry through Target’s intellectual property (IP) and proprietary platform that automates processing, servicing, and administration of loans, investments and insurance products.
 

CP Gurnani, Tech Mahindra CEO, said, “This acquisition will make us a formidable player in the UK BFSI market with over 50 major financial institutions as clients. The acquisition lies at the confluence of several of our strategic priorities – add IP, double BFSI revenue and expand European footprint.”

Tech Mahindra will pay up to £64 million upfront and a 2017 deferred consideration of up to £16.28 million for the Target Group deal. It will also pay back £17.1 million on account of loan notes at closing. Also, Target’s management is rolling over 7.6% of their stake into the company (worth £6.8 million) and this will be paid out in 2020 as a second deferred consideration.

Having about 740 employees, Target Group had revenue of £51 million in 2015. It will remain a stand-alone entity and its entire management team will continue to have full operational responsibility.

Paddy Byrne, chairman, Target Group, said, “We have been focused on building expertise in the lending, investments and insurance sectors, becoming a market leading player in each of our verticals. We have delivered significant growth over the last four years, with the support of our current shareholder, Pollen Street Capital. We now look forward to the next stage in our growth. By joining with the $4 billion Tech Mahindra, it will allow us to serve our clients better, greatly expanding the solutions and services we provide.”

As part of the composite deal, Tech Mahindra shall provide a corporate guarantee not exceeding £30 million in relation to the payout in 2020.