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Private Equity Acquiring Virtusa IT Service Provider for $2B

Baring Private Equity Asia is acquiring Virtusa Corp., a global IT services provider, for $2.0 billion. The deal’s valuation is a lofty 16.2X based on the last 12 months of EBITDA through June 30, 2020.

This is M&A deal 364 that ChannelE2E and MSSP Alert have covered so far in 2020. See the full M&A deal list here.

The deal is expected to close in the first half of 2021, subject to various approvals. The transaction is not subject to a financing condition.

About Virtusa: Multiple Bidders?

Virtusa’s core services include consulting and system design, application engineering, analytics and data, digital process automation, enterprise application integration, cloud services and managed services.

For its first quarter of fiscal 2021 (ended June 30, 2020, Virtusa’s revenues were $301.1 million, down 8.7% sequentially and 5.6% year-over-year. At the time, COVID-19 was impacting Virtusa’s customer spending, CFO Ranjan Kalia said on July 30, 2020.

At least three companies bid to acquire Virtusa. The process started on July 20, when the Virtusa board received an unsolicited proposal to acquire the business.

Seeking to maximize shareholder value, Virtusa’s board pursued additional buyout bids for the business. Seven companies expressed interest, and five signed non-disclosure agreements. Baring ultimately emerged as the most ideal buyer, Virtusa’s board says.

Baring Private Equity Asia (BPEA)has roughly $20 billion in assets under management. BPEA currently has over 40 portfolio companies active across Asia with a total of 224,000 employees and sales of approximately US$39 billion.

Baring Acquiring Virusa: Executive Perspectives

Jimmy Mahtani, managing director of BPEA, said:

“Technology is continuing to drive marketplace evolution at an unprecedented pace, creating new opportunities as well as complexities. Virtusa’s global team of talented professionals, software engineering heritage, and deep domain expertise position it uniquely to help enterprises across industries accelerate their most strategic digital and cloud transformation initiatives. We are excited to partner with the Company in its next phase of evolution. We’re pleased that the Board has approved our offer unanimously.”

Added Rowland T. Moriarty, Lead Independent Director of Virtusa’s Board of Directors:

“Through this transaction, we are pleased to maximize value and deliver a significant, immediate cash premium to Virtusa’s shareholders. Today’s announcement is the culmination of a process by Virtusa and our financial advisors, which included engagement with strategic and financial parties regarding a potential transaction, and, after a thorough review, the Board unanimously concluded that this all-cash premium transaction with BPEA achieved the Board’s objective.”

Concluded Kris Canekeratne, chairman and CEO of Virtusa, said:

“This transaction represents a strategic evolution for Virtusa and a unique opportunity to take our business to new heights at a time of accelerating digital adoption. The benefits of this transaction extend to all Virtusa stakeholders, including our shareholders, who will receive immediate and substantial cash value, as well as to our team members, since BPEA has an exemplary track record of valuing innovative and talented global teams and supporting and empowering the businesses in which it invests. With a strong partner in BPEA, we will solidify our position at the forefront of digital transformation for years to come.”

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