Cognizant to buy PA Consulting?

(By Anthony Miller – Monday, 20th April 2009 9:40am). The newswires are buzzing with rumours that New Jersey-headquartered Indian SI, Cognizant, is looking to buy UK-based consultancy, PA Consulting for $300-350m, about 1x PA’s 2008 revenues and 35x its profits. PA is one of the more opaque players in the UK software and IT services market, though it was thrust into the spotlight late last year when it was fired from a Home Office contract after one of its staff lost a memory stick with sensitive data (see Home Office fires PA Consulting).

Cognizant has a lower profile in the UK than many of its India-based peers, though is growing fastest. Last year we reckon Cognizant’s UK revenues were around £220m, up over 70% yoy. The acquisition, if it goes ahead, would still leave plenty of cash in the bank – at the end of the year Cognizant was showing some $735m in cash and equivalents and no debt. In recent times, Cognizant has made just a few niche acquisitions, all in the US, including 60-man Strategic Vision Consulting (June 2008), 430-man pharma analytics consultancy, marketRx (November 2007), and 100-man managed services outfit, AimNet (September 2006).

Cognizant has also been making various attempts to try to boost its presence in Continental Europe, through ‘partnerships’ with troubled Netherlands-based ‘local hero’, Ordina (and see Ordina finally gives up on BPO), and hardly in much better shape T-Systems, the IT services arm of Deutsche Telekom (Ed: why do telcos insist on playing in ‘real’ IT services? They surely know it’s only going to end in tears!).

Many of the major India-based SIs have handsome cash piles – what a great time to go looking for some bargains!