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October 4, 2000
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Money > Stocks > Market Impact > Report October 4, 2000 |
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Marketmen react cautiously to Silverline buyoutNetScribes/Rajiv Banerjee Silverline Technologies Ltd has announced the acquisition of Hong Kong-based Sky Capital International (SCI) for $ 22 million in an all-cash deal. SCI is an IT consultancy company and is Silverline's single largest client. Marketmen have reacted cautiously to this news, preferring to wait and watch till the entire deal is been closed. "It is good for the company to grow in an inorganic manner, but nowadays, even Infosys is thinking ten times before going in for acquisition, as there are many technicalities involved in an acquisition," said Nayan Mehta, an analyst at Emkay Shares and Stock Brokers Pvt Ltd. The recent court case slapped on Polaris Software by Data Inc, a US company Polaris was pitching to buy into, is partly the reason why marketmen have adopted a wait and watch attitude towards the Silverline news. "The manner in which the deal will be closed will be of paramount importance. How much will the acquisition help compliment Silverline's existing business needs to be seen," said Mehta. Various factors, like the revenue contribution by the acquired company to the parent, employee revenue inputs, and the attrition level have to be taken into consideration, he said. Announcing the acquisition at a board meeting on October 3, Shankar Iyer, president and CEO of Silverline Technologies, said that the acquisition will help leverage the company's position in the Far East and diversify its revenue streams. Shankar said the acquisition will help Silverline in broadening its revenue base from non-US markets and will have direct access to over 50 customers of SCI in Hong Kong and Japan. SCI's client base includes American Express, AT&T, Cable & Wireless, Cathay Pacific, and Standard Chatered. Shankar said that the acquisition will boost the company's offshore business, leading to margin expansion. He said it will help strengthen the existing client relationships by expanding its range of services provided and improve delivery capabilities. Australian entrepreneur Grahame Simmons holds 95 per cent in SCI, and the rest is held by SCI employees. The company posted a turnover of $ 24.3 million in 1999-2000.
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