BFL Software buys Mphasis in an all stock deal - Views on News from Equitymaster

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BFL Software buys Mphasis in an all stock deal

Feb 8, 2000

BFL Software buys Mphasis, a US based software outfit for Rs 8.64 billion in an all stock deal. Mphasis chief Jerry Rao will take over as Chairman of BFL Software. BFL Software was earlier part of the Bangur group. Barings took a 52% stake in the company two year’s back, revamped the company and provided it with business contacts. The company boasted of a client list that included the likes of Compaq and Federal Express.

Till last year 25% of the revenues of Rs 1 bn were accounted for by Y2K servicing. The company however could not make a successful transition and made a loss in the last quarter. This along with the departure of the company’s chief executive revealed the company to be in bad shape.

All along there were rumours that Barings was interested in selling the stake. The current deal has been primarily structured by Barings which is also an investor in Mphasis. The deal is on the lines of the merger of Leading Edge and ECapital where the ECapital chief Suresh Rajpal took over the merged entity. Chase/Oppenheimer which was an investor in both the entities had put in place this deal.

The deals of the current nature highlight the fact that the top class manpower availability is the key to managing growth in the fast track software industries. This is likely to become even more critical in the future. Even in the last few months only those companies, which boast of a top class management have been able to make a successful transition post Y2K.

Market View:
Most analysts have rated BFL Software as a buy primarily because of its lineage, its facilities and its clients. The market views BFL’s current problems as temporary and expects the company to do well in the FY2001.

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