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Silverline to complete merger by year end

NetScribes/Ganesh Ramamoorthy

Silveline Technologies, which came under a lot of flak from the market and analysts when it announced its acquisition of the Nasdaq-listed e-business consulting company SeraNova, is expecting to close the merger by December 2000 or early January 2001.

The company is finalising an integration strategy that will have a positive impact on the earnings and also reflect easy-to-achieve targeted synergies. It also plans to launch a branding campaign for the combined entity in the next six months.

Underlining that the synergy will happen at the sales level, SeraNova's vice president in charge of corporate strategy, Tarun Chandra, said, "Our immediate task now is to complete geographic consolidation and elimination of duplicate costs."

Post merger, Silverline and SeraNova will cross-sell to each other's customers to boost sales initially. "The sales force of the companies will be integrated so that they can cross-pollinate each other and introduce to each other's customers and share leads," Chandra said.

In the first three months, the combined entity will target top 10-20 customers who have annual IT budgets exceeding $1 billion. By June end, 50 existing customers with individual IT budgets over $500 million will be targeted for cross-selling. "We hope to achieve cross-selling penetration in at least 20 of our top 50 customers in the next six months," Chandra said.

However, at the delivery level, SeraNova will still remain independent. "Hyderabad and Bangalore will be the centres of excellence for e-business services. Chennai, Thane, and Seepz, Mumbai will be the centres of excellence for legacy systems and package implementation. And the centre in Utah will be the centre for excellence in design," Chandra said.

With the offshore component in the combined entity expected to be around 28 per cent, Chandra maintains there is plenty of room to grow and improve, as many of the company's Indian peers have offshore components of 45-50 per cent in their revenues. "So, the growth margins we have now are very sustainable," Chandra said.

He further said Silverline will continue to pursue strategic and accretive acquisitions with the help of a dedicated in-house Wall Street M&A team.

Analysts had earlier given a thumbs down to the deal because SeraNova was a loss-making firm at the time of being bought. Though Silverline insisted that SeraNova would add to its EPS, analysts thought otherwise.

Two months down the line, the same analysts are taking a relook at the deal, with SeraNova - spun off from the parent, Intelligroup, with a $27-million asset transfer in January 2000 - reporting a positive EBITDA for the September quarter.

SeraNova is now looking at doubling its net sales to $80 million and post a net profit for the fiscal ending December 2000. Analysts expect the combined entity's revenues to grow to $280 million for the fiscal to March 2001, with SeraNova accounting for about 61 per cent of the total revenue.

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