Steria snaps up Xansa for £472 million

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Steria today announced that it plans to buy Xansa for £472 million in a deal that will result in multi-million pound savings and create an outsourcing giant capable of taking on some of the bigger players both onshore and offshore.

The French company says that the acquisition will make it a top 10 European services player and shave €24 million (£16.2 million) from its overheads next year. Likewise, it hopes to reduce costs by €49 million (£33.1 million) in 2009 and €53 million (£35.8 million) from 2010 on, but these reductions will come at an initial hit of around €49 million (£33.1 million) over two years.

Xansa currently boasts more than 8,000 employees, 5,000 of which are based in India. Steria will benefit from these skilled staff in addition to beefing up its public sector and financial services expertise through the purchase.

"This transaction constitutes a major step in the implementation of our strategic plan," said François Enaud, Steria's general manager and chief executive. "Focused on the fastest growing market segments, the new group will be one of the most attractive in the ITS sector, both through the value of its service offerings (Business Transformation and Business Operation) and its exceptional industrial delivery model. I am sure that such an alliance represents an exciting opportunity for all of our employees."

Analysts agreed that the move will strengthen Steria's standing in the UK.

Once the deal has gone through, the newly-bolstered Steria will jump from number 38 in the list of the UK's largest software and IT services (S/TIS) providers to number 15, according to Dominique Raviart, a senior analyst at Ovum.

"We think the timing of the operation is right. Xansa has a well-established offshore presence, and it now has a successful delivery model that blends onshore and offshore capability for its customers. The company has faced several years of flat growth and mid-digit operating margin..." he said.

"...Despite its tremendous reinvention, Xansa still has to increase its exposure to solutions and consulting in order to move away from direct competition with the Indian vendors. Steria's traditional and growing focus on solutions may help here. Finally, one of the great benefits for Steria is the 5,000 Indian headcount that Xansa brings to the deal. Steria had already engaged in setting up a presence in India and the Build Operate Transfer contract was to be finalised this year. Xansa will therefore accelerate the growth of Steria in India to a point where the French company has more Indian presence than players such as Atos Origin, Fujitsu Services Europe or Logica CMG. Steria now needs to demonstrate that it can avoid attrition in India and make its Continental European clients use Indian offshore."

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