MphasiS acquires US based Digital Risk for dollar 200m

Bangalore-based IT company MphasiS has acquired Florida, US-based data analytics company Digital Risk, for $200 million (about Rs 1100 crore) in an all-cash deal, a senior executive of the company said. 

The transaction value also includes about $25-30 million in milestone-linked payments that are staggered over the next 2-3 years. 

"For the past 15 months or so, we have been looking for a specialised company in banking and capital markets space and Digital Risk presented the best opportunity," said Ganesh Ayyar, chief executive of MphasiS, which over the past year or two, has been focusing more on catering to the financial services industry. MphasiS, owned by computer-maker Hewlett-Packard, was in discussions with Digital Risk for about two months. 

Standalone business unit

The transaction is expected to close by January 31, 2013, subject to regulatory approvals. Upon completion, Digital Risk will operate as a standalone business unit within MphasiS, retaining its brand identity. Digital Risk's current CEO and chairman Peter Kassabov will report to Ayyar. 

Digital Risk, which owns a patent-pending data analytics software platform called Veritas, specialises in offering services in the risk and compliance area, especially to the mortgage industry. 

Its business is limited to the US. With expected revenues of about $127 million in 2012, Digital Risk has been growing at about 70% over the past three years and has profit margins that are in the teens, according to MphasiS. 

MphasiS' purchase of Digital Risk will offer an exit route for private equity firm Century Capital, which owned about 40% in the company. 

There is no overlap in clients and the new company complements its existing business in financial services industry, and presents significant cross-selling opportunities, according to MphasiS. 

"This is not a generic acquisition, it is a highly specialised, domain-specific transaction. We will see more of similar deals in the coming months," said Amit Singh, executive director and head of technology practice at home-grown investment bank Avendus, which advised MphasiS on the deal. Earlier this year, Wipro had acquired Australian company Promax Applications for $36 million.