Ovum pours water on M&A talk

There will be no large-scale M&A fest in 2008, according to analyst house

The IT services market is unlikely to see many large-scale merger and acquisition (M&A) deals in 2008, analyst house Ovum has asserted.

Ovum argued that hunger for big-ticket deals remains limited as it rubbished press speculation that offshore outsourcing giant Wipro is lining up a bid for Capgemini.

It said Indian firms such as Wipro and Infosys don’t have the “capability or desire” to integrate an 80,000-employee global business.

“Mid-sized players have joined forces (Steria and Xansa as a recent example) and the big fish have tended to swallow up much smaller, niche firms (BT and Net2S, Fujitsu and Mandator, for instance) rather than taking on major acquisitions and integration headaches,” said Phil Codling, principal analyst at Ovum.

“This is likely to remain the pattern in 2008. Talking to IT services industry bosses, we still find no great desire to do large-scale M&A, even if everyone admits they are both “in play” (who isn’t?) and “on the look-out” - as Wipro might well find if it tried to integrate Capgemini, the big plays are fraught with risk and potentially hugely disruptive.”