Sparta Consulting to merge with KPIT Cummins

Combined practice to provide a credible alternative to Tier 1 suppliers in Enterprise consulting.

PUNE– KPIT Cummins Infosystems Ltd has announced that they have entered into a definitive merger agreement with Sparta Consulting, a California, USA based firm and a leading provider of high end SAP solutions. The all-cash agreement is for a milestone based consideration of USD 38 million which includes a bonus of USD 4 million.

Expressing his views on this occasion, Mr. Kishor Patil, MD & CEO, KPIT Cummins, said “Sparta Consulting is an excellent strategic fit and growth accelerator to our focused business model. It has a very committed team with extensive experience in rapidly scaling up ERP consulting business and we see a large market opportunity in this area. We are particularly impressed with the excellent track record of the Sparta team. The team has created a SAP services business which has grown nearly 300% year-on-year under trying economic conditions. The same team has earlier successfully created and grown an Enterprise consulting business to over USD 250 million. We welcome this merger and look forward to jointly helping our customers achieve their post-downturn growth objectives”.

Paul Freudenberg and Lokesh Sikaria, the two key principals at Sparta Consulting, added: “We have found an excellent partner in KPIT Cummins and are very excited about joining a focused solutions leader. KPIT’s larger geographic presence specifically in Europe and Asia Pacific complement our strong relationships in the SAP ecosystem. We are confident that our combined and complementary strengths create a leadership position in the SAP centric solutions business. We see great synergy in market verticals and domain focus. In addition, the IT services capabilities of KPIT Cummins beyond SAP, makes it a perfect strategic fit to accelerate the growth of Sparta Consulting by creating even more value for customers.”

Strategic Rationale

The merger of Sparta Consulting, based in Folsom, CA, USA, further strengthens KPIT’s business model to sharply focus on select industries and achieve market leadership by creating best in class practices/offerings that help customers achieve their operational & strategic objectives.

This transaction is in line with KPIT’s stated growth strategy and is expected to result in greater efficiencies and increased market share. Key Highlights:

o Accelerates Growth: With over 1000 consultants in the combined entity, the SAP-led consulting practice provides a scalable alternative to Tier 1 companies which usually pursue larger (USD 25 million+) multi-service opportunities. With global demand for SAP based services growing at 24+%, the SAP led consulting practice has the potential to grow into a USD 100+ million business in next 3 years.

o Reinforces current SAP strengths of KPIT and the strategy to create a best in class SAP practice. Sparta’s dynamic team and proprietary templates/methodologies reinforces KPIT’s current strengths in value added SAP solutions to Automotive, Hi-Tech and Industrials sectors.

o Provides a headstart into an adjacent vertical: Sparta’s footprint in the Energy & Utilities sector would provide KPIT a headstart into this adjacent space.

Impact of merger on Sparta Consulting

o Expand vertical reach: In addition to the existing verticals, Sparta Consulting will now also be able to address the growing SAP market in Automotive and Industrials (KPIT has 100+ customers in this space).

o Extend Global Presence: Sparta would be able to leverage KPIT’s global presence and effectively scale in regions such as Europe & Asia Pacific.

The transaction is subject to legal and other clearances.