The number of acquisitions of American companies by companies based in India is on the rise. In 2005, the total value of those buyouts reached $1.1 billion, up from $308 million the year before. (The total value of all M&A activity in the U.S. for 2005 topped $700 billion.)
Generally speaking, Indian companies are acquiring U.S. firms to be closer to their stateside customers and to gain access to capital markets. American firms can be cheap compared with Indian companies, whose valuations are skyrocketing. When Sudhakar Ram, CEO of Mastek, an IT outsourcing company based in Mumbai, went shopping recently for a software firm in India, he encountered valuations in the neighborhood of three times revenue. That's double the multiple he found for U.S. companies.
Four months ago, Mastek acquired Entegram, a software firm in Windsor, Conn., for $2 million, or 1.5 times revenue. Ram liked Entegram's customer base, while Entegram's CEO, Ramesh Mugalam, was eager to gain access to Mastek's offshore programmers. "I can open a lot more customer doors," Mugalam says, "now that I can say I have Indian resources behind me."