Persistent Systems Ltd5:40 pm IST
Persistent Systems to acquire Nagarro in €1.27B cash deal; creates a 2.9B revenue AI-led engineering powerhouse
Deal overview
- Nagarro valued at €1.27 billion enterprise value; €81 per share in cash.
- Premium: 140% to undisturbed close; 94% to 3-month VWAP.
- 21% Nagarro stake already secured; management to tender their shares.
- Not a consolidation; described as complementarity with value creation for shareholders.
- Combined group expected to be $2.9 billion revenue; 46,000+ employees across 40+ countries.
- Post-merge North America 62% revenue; Europe 22%; Rest 16%.
- Persistent FY26 revenue about $1.654B; run-rate above $1.7B.
- Nagarro: roughly €1B revenue; 18,500 professionals; EBITDA margin about 13.9%.
- Transaction valued at 1.27x EV/Revenue and 9.12x EV/EBITDA.
- Financing via Barclays bridge facility; €1.4B; Euribor plus 175–250 bps.
- Goodwill about 70%; intangibles about 30% amortized over eight years.
- Corporate guarantee by Persistent for €1.4B; cash EPS accretive in Year 1.
- Regulatory approvals expected; BaFin filings in ~4 weeks; close by Q4 CY2026 or early CY2027.
Financial profile (combined)
- North America revenue footprint: Persistent ~81%+, Nagarro ~35%.
- Post-merger NA share about 62%, Europe 22%, Rest 16%.
- Persistent margin ~15.6%; PAT margin ~12.6%.
- Nagarro EBITDA margin ~13.9%.
- Combined: 46,000+ employees; 40+ countries; diversified geographic footprint.
- Cultural fit supports smoother integration; European-domiciled, India-Europe collaboration.
- Key partnerships: Nagarro is an OpenAI reseller; SAP partner; ERP-focused.
- Nagarro HQ Munich; 18,500 professionals; 13,500 in India; 1,500+ rest of world.
Valuation & financing
- Equity value €1B; outstanding shares excluding treasury ~€12.4M.
- Net debt ~€267M; enterprise value €1.27B.
- EV/Revenue 1.27x; EV/EBITDA 9.12x (Calendar Year 25 guidance).
- Bridge facility €1.4B from Barclays; rate Euribor + 175–250 bps.
- Leverage target 1.9–2.5x; to ~1x by FY2030 with open-offer impact.
- Goodwill ~70%; other intangibles ~30% amortized over 8 years.
Timeline & approvals
- BaFin filing within ~4 weeks; regulatory clearance 10 working days to two weeks.
- Open offer: 4-week acceptance; possible 2-week extension.
- Persistent AGM planned last week of July; shareholders to approve the transaction.
- Closing expected in Q4 CY2026 or early Q1 CY2027.
Q&A highlights
- BaFin-related Nagarro queries addressed; no material impact on performance.
- Cross-sell opportunities across ERP, CX; broaden geographic reach and verticals.
- Management continuity: key leaders stay; incentives planned under regulatory rules.
- Cannibalization risk acknowledged; Persistent aims to win more business through AI.
- Nagarro EBIT margin CY25 10.9%; Q1 CY26 12.1%; target to sustain margins.
- Open questions on post-merger value-creation plan to be shared after approvals.
Outlook & guidance
- FY31 target: revenue around $5B; Europe to reach roughly 22% share.
- Nearshore Europe delivery expanded; presence in Japan and Middle East grows.
- No QIP planned; asset-level private-equity options considered for deleveraging.
- Integration to sustain growth; capital allocation toward growth investments.
Read the original filing ↗