Tech Mahindra to buy British financial services BPO firm Target Group in a Rs1,178-cr deal

28 May 2016


Indian IT firm Tech Mahindra yesterday struck a deal to buy British processing platform company Target Group from Pollen Street Capital for around £120 million (Rs1178 crore) in order to bolster its presence in the banking and financial services sector.

The proposed acquisition comes nearly four months after the Mumbai-based company acquired Geneva-based IT consulting group Sofgen Holdings Ltd for an undisclosed sum. (See: Tech Mahindra to acquire Geneva-based Sofgen Holdings)

Under the terms of the deal, Tech Mahindra will pay up to £64 million upfront and a 2017 deferred consideration of up to £16.28 million.

Tech Mahindra will also pay back £17.1 million on account of loan notes at closing and the management is rolling over 7.6 per cent of their equity value into the company worth £6.8 million, which will be paid out in 2020 as a second deferred consideration.

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

The acquisition catapults Tech Mahindra to one of the top three processors in the UK financial services for certain complex lending and investment product categories. It also strengthens its presence and adds several new clients.

The acquisition will help Tech Mahindra to expand its offerings in the lending, savings and investment and insurance sectors, with a significant opportunity to cross-sell Tech Mahindra / Target offerings to each other's client base and extend its platform to other markets.

Target Group is a leading provider of Business Process Outsourcing (BPO) and software solutions for over 50 major financial institutions for loans and mortgages, savings, investments and insurance.

Its clients include Goldman Sachs, Morgan Stanley, Credit Suisse, Barclays and Shawbrook Bank.

Its fintech platform manages assets of over £24 billion, and currently process over 18 million accounts and collect £3 billion of direct debit payments each year on behalf of both private and public sector clients.

The Cardiff-based company employs around 740 people and generated revenues of £51 million last year.

Paddy Byrne, chairman of Target Group described how the transaction was a logical and positive next step in Target's ongoing growth:  ''Target Group has been focused on building expertise in the lending, investments and insurance sectors, becoming a market leading player in each of our verticals.''

''By joining with the $4 billion Tech Mahindra, it will allow us to serve our clients better through greatly expanding the solutions and services we provide,'' he added.

CP Gurnani, MD & CEO, Tech Mahindra said, ''Target Group's strong IP and disruptive proprietary platform significantly enhances our Fintech offerings. This acquisition will make us a formidable player in the UK banking, financial services and insurance market.''

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