Indian information technology (IT) firm Infosys (NASDAQ: INFY) has been a fast grower over the years. Of course, with relatively lower wage rates, it's easier to compete on contract bids.But growth cannot go on forever. So might we see some big M&A deals in the sector?
Well, last week, there was a rumor that Infosys was thinking of buying Cap Gemini, which is a mega IT consulting firm in France. Investors were certainly taking things seriously as Cap Gemini's stock surged 6%.
To get some perspective on things, I interviewed Michael Guilbault, who is the senior analyst of professional services at Technology Business Research Inc.
His take? He thinks the probability of a deal is "close to zero."
Why? Guilbault points out that Infosys has focused on mostly small acquisition targets. Also, a key asset for Infosys is its culture and that could be vulnerable in a massive deal.
According to him:
"Recent history in the professional services industry shows integrating consultancies into the corporate fold is one of the most challenging kinds of mergers. Infosys isn't going to buy a bear and have to transform it into a gazelle; they'd rather just keep feeding the gazelle."
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
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