French IT services company Steria, the fifth largest in Europe, has announced its intention to buy UK-headquartered counterpart Xansa for £472 million.

This price represents a 70% premium on Xansa’s market cap as of 20^th July 2007. The acquisition has been unanimously recommended by Xansa’s board of directors.

Francois Enaud, chairman and CEO of Steria, said that the acquisition would bring with it not only a significant customer base in the UK market, but also Xansa’s “unique delivery model – the most mature in Europe.”

This refers to Xansa’s use of its 5,000 Indian employees that make up 60% of its total workforce. The company prides itself on its operational symmetry – it is neither an ‘offshoring’ firm, nor a colonial exploiter of cheap labour. It counts many Indians among its executives, but its UK offices are the customer facing side of the company.

Steria draws most of its contracts from the public sector, especially in its home country market. French employment laws and attitudes have limited its ability to benefit from the Indian IT services boom.

Xansa, meanwhile, has bucked the trend in its ability to sell offshore services to the public sector – it counts both the NHS and the BBC among its clients. That success relates in part to its operational symmetry: a contract with Xansa is not a commitment to an all-Indian workforce, and as such is a less political controversial move.

So in picking up Xansa, Steria is doubtless making a bid to repeat that performance for the whole of the European market. The acquisition grants it more a greater Indian headcount than competitors Atos Origin, Fujitsu Services Europe or LogicaCMG, according to Dominique Raviart, analyst with Ovum.

Meanwhile, says Raviart, Xansa will benefit from its involvement in Steria’s consultancy and ‘solutions’ work, further differentiating itself from its Indian competitors.
 

Further reading

Information Age analysis - Xansa attains Indian equality - March 2007
Information Age feature - How Capgemini embraced India - June 2007