Steria buys Xansa to grow
French IT services provider Groupe Steria has set out on a £472 million acquisition of UK-based technology firm Xansa to give it a strong foothold in India.
Steria has over 10,000 employees working in 15 countries. For the year ended 31 December 2006, Steria reported revenue of euro 1.26 billion, operating profit of euro 81.1 million and profit before tax of euro 77.9 million.
The combination of the two firms would be ranked among the top 10 IT service providers by revenue in the European and UK markets, and is expected to be ranked in the top four in the UK providing IT services to the public sector.
Steria has been working on establishing a presence in India where over 5,000 of Xansa’s 8,000 global employees are based. “India is a very important part of the equation for Steria. Xansa has the most advanced delivery model serving clients in Europe through an integrated UK/India delivery platform,” said Groupe Steria CEO Francois Enaud. “Their significant platform in India is a key part of their success and we are delighted to be in a position to expand using that platform to create a global delivery model.”
Steria should benefit greatly from the deal. “The acquisition of Xansa will strengthen Steria’s presence in the UK,” said Ovum analyst Dominique Raviart. “Despite euro 290m in 2006 UK revenues, Steria has largely been an infrastructure management player working for local government. Xansa is well-known in the UK for its work in application services and F&A BPO with the largest firms in the private sector, largely with banks, retail and utilities. Thanks to Xansa, Steria will therefore greatly improve its services range, and will jump from a ranking of 38 to a ranking of 15 among the largest S/ITS providers in the UK, with £580m in sales, after Siemens and right before Tata Consultancy Services.
“We think the timing of the operation is right. Xansa has a well-established offshore presence, and it now has a successful delivery model that blends onshore and offshore capability for its customers. The company has faced several years of flat growth and mid-digit operating margin. In FY07, the company proved its strategy had worked: its application services business had stable revenues, suggesting the company was now able to balance declining prices by contract extensions.
“Despite its tremendous reinvention, Xansa still has to increase its exposure to solutions and consulting in order to move away from direct competition with the Indian vendors. Steria’s traditional and growing focus on solutions may help here. Xansa will accelerate the growth of Steria in India to a point where the French company has more Indian presence than players such as Atos Origin, Fujitsu Services Europe or LogicaCMG. Steria now needs to demonstrate that it can avoid attrition in India and make its Continental European clients use Indian offshore.”