Zylog Targets $100M Acquisition

Business Daily from THE HINDU group of publications Thursday, Dec 16, 2010

Article by T.E. Raja Simhan

Following the acquisition of Canada-based Brainhunter in February, Zylog Systems Ltd, the Chennai-based software company, plans to make another acquisition with a target size of nearly $100 million, according to the company's Global Chief Financial Officer, Mr S.P. Srihari.

“This does not mean that we will not look at a company that is in $50-million range. We will consider if it fits in to our radar,” he told Business Line.
The company is evaluating many candidates, including one in the US in the BFSI (banking, financial services and insurance) space that employs 1,500 people, he said. “We should close the deal in the next three months,” he said.
Mr Srihari said other than the BFSI, Zylog is looking at target companies present in sectors such as pharmaceutical and ERP. Grant Thornton, a professional services firm advising businesses that helped Zylog in previous acquisition, will be involved in the new one too, he said.

Mr S.P. Srihari

Brainhunter is key for Zylog

In February, Zylog acquired the Canada-based Brainhunter for Canadian $35 million (around Rs 150 crore) to offer consulting and engineering services in Canada. This company will now help Zylog double its revenue for fiscal 2010-11 to Rs 1,850 crore (Rs 979 crore in the last fiscal). Half of Zylog's revenues will come from Brainhunter, he said.

The acquisition of Brainhunter was done through the Company's Creditors Arrangement Act (CCAA) bidding process (in Canada) where Zylog emerged as the successful bidder.

A significant portion of Brainhunter's revenue is derived from the Federal Government of Canada.

It caters to Government departments, BFSI and telecom that are key focus segments for Zylog. Hence, there is high potential for cross-sell, he said.

Fund raising

Mr P. Srikanth, Executive Director, Zylog, said the company has the option to raise funds to the tune of Rs 400 crore by issue of securities/instruments in domestic/international markets. This includes equity shares/warrants with convertible or non-convertible debentures under qualified institutional placement or foreign currency convertible bonds or American depository receipts or global depository receipts.

Zylog's shareholders recently gave their consent to empower the board for the fund raising and enhance the limit from Rs 250 crore to Rs 400 crore, he said.