Mergers and Acquisitions, IT management, Enterprise, Mergers and Acquisitions, Content

Hitachi Acquires GlobalLogic for Digital Transformation Services

Hitachi is acquiring software developer and digital product engineering specialist GlobalLogic Inc. from private equity firm Partners Group for $9.6 billion. The deal seeks to further strengthen Hitachi's digital solutions, services and data business -- known as Lumada.

This is technology M&A deal number 213 that ChannelE2E has covered so far in 2021. See all technology M&A deals for 2021 and 2020 listed here.

The acquisition surfaces amid challenging times at Hitachi. The company's Hitachi Vantara division experienced layoffs and executive churn in 2020. At the time, Hitachi Vantara CEO Gajen Kandiah vowed to pivot the division toward five emerging business and technology opportunities:

  1. Solutions to Optimize Data Center Efficiency, which leans heavily on the Hitachi Virtual Storage Platform 5000 Series.
  2. Solutions to Maximize Data Center Flexibility, which taps the company’s updated Unified Compute Platform (UCP).
  3. Solutions to Accelerate to the Cloud, which leverages the acquisition of REAN Cloud, and forthcoming Kubernetes service offerings.
  4. Solutions to Modernize Data and Applications via the company’s Lumada DataOps and Smart Spaces offerings.
  5. Solutions for OT/IT Convergence, which taps the company’s Lumada IoT platform.

Hitachi Acquires GlobalLogic: Deal Valuation, Financial Details

On paper, acquiring GlobalLogic aligns with those Hitachi Vantara goals along with parent Hitachi's overall digital transformation efforts.

Still, the acquisition represents an expensive IT services and software development bet. Indeed, the M&A deal will cost Hitachi $9.6 billion -- with an equity value of $8.5 billion, and an enterprise value of $9.5 billion, Hitachi says.

The valuation multiple is 37.4 times of expected adjusted EBITDA for calendar year 2021, and 29.4 times expected adjusted EBITDA for calendar year 2022, the companies say.

Those are lofty valuation multiples, in ChannelE2E's opinion. Offering context on the valuation, Hitachi says the multiples are "within the calculation range of Hitachi’s comparable company analysis and the discounted cash flow method."

GlobalLogic: Business History

GlobalLogic's original business, Induslogic, was founded in 2000 as a provider of outsourced software and product development services. That company merged with Bonus Technology in 2006 to form GlobalLogic.

Backed by venture funding, GlobalLogic then acquired Lambent Technologies -- an offshore software development firm based in India.

From 2006 through 2018, GlobalLogic had multiple investors and private equity ownership transitions. Key backers along the way included Apax Partners, which sold its stake in GlobalLogic to private equity firm Partners Group in 2018.

Backed by Partners Group, GlobalLogic made multiple growth-oriented moves from 2018 through Q1 of 2021.

Hitachi Acquires GlobalLogic: Digital Transformation Opportunities

Now, Hitachi is acquiring GlobalLogic from Partners Group. The deal, Hitachi says, will create synergies across Hitachi’s five sectors – IT, Energy, Industry, Mobility and Smart Life – and automotive systems business (Hitachi Astemo) by "accelerating the advanced digital transformation of social infrastructure such as rail, energy, and healthcare at a global scale."

Indeed, GlobalLogic's business certainly has scale. Among the GlobalLogic factoids to note:

  • GlobalLogic operates design studios and software product engineering centers around the world, the seller notes.
  • Total headcount spans  20,000 professionals across 14 countries.
  • Revenues are expected to reach approximately $1.2 billion with adjusted EBITDA margins to be over 20% in fiscal 2021. That's up from $500 million in revenue around 2018, according to a press release at that time.
  • GlobalLogic will aim to achieve adjusted EBITDA of over $1 billion by fiscal 2028.

Among the areas to watch: GlobalLogic has “chip-to-cloud” software product engineering technology as well as experience design skills and vertical industry expertise, Hitachi asserts. The GlobalLogic team understands how to build "new interaction models and digital experiences, such as new digital ways of shopping or new models for delivering and receiving healthcare," Hitachi says.

Hitachi Acquires GlobalLogic: Executive Perspectives

In a prepared statement about the deal, Hitachi President and CEO Toshiaki Higashihara (pictured at top) said:

“The acquisition of GlobalLogic creates an exciting new opportunity for Hitachi to expand our offerings of Lumada solutions and services, provide value to customers in their digital transformation journey, and grow our Lumada business globally. The synergy of GlobalLogic’s leading experience design and innovation with Hitachi’s expertise in IT, operational technology, and products, will help us realize our goal to be the leading digital transformation innovator in social infrastructure worldwide. Together, we will create new social, environmental and economic value for our globally expanding client companies and elevate QoL (quality of life) for people through contributions to realize sustainable society.”

Shashank Samant, CEO, GlobalLogic
Shashank Samant, CEO, GlobalLogic

Added Shashank Samant, president and CEO of GlobalLogic:

“Companies in every industry are transforming with digital technology – to better engage customers, create new revenue streams and drive a higher quality of life. We have a tremendous opportunity ahead and we are excited to embark on this journey with Hitachi, combining our collective skills, technologies, and market presence to deliver greater value to our clients as they transform their businesses.”

The deal is expected to close before the end of July 2021 and is subject to customary conditions and regulatory approvals, Hitachi says.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.