Capco Acquisition: Key Details, Impact, and What Comes Next

Wipro's acquisition of Capco, valued at $1.45 billion, marks a significant milestone in the consulting and technology sectors. This strategic move positions Wipro as a leading provider of end-to-end solutions for the financial services industry, enhancing its capabilities in digital transformation and consulting. Capco will continue to operate independently, leveraging Wipro's technological prowess to drive industry innovation.

What Is Capco?

Founded in 1998, Capco is a global business and technology consultancy specializing in digital transformation, management consulting, and technology solutions. The firm stands out for its deep expertise in the financial services and energy sectors, offering comprehensive services that drive innovation and transformation. Capco's unique selling points include a proven track record with clients like Deutsche Bank and NatWest, a focus on thought leadership, and a global reach supported by a diverse team of experts.

Who Acquired Capco?

Wipro is a global leader in IT services, consulting, and business solutions, leveraging AI-infused technologies to empower clients worldwide. The company offers a wide range of services, including applications, artificial intelligence, business process, cloud, consulting, cybersecurity, data & analytics, digital experiences, engineering, and sustainability. Serving industries such as banking, healthcare, and manufacturing, Wipro is recognized for its significant market influence and commitment to sustainability, aiming for net-zero emissions by 2040.

When Was Capco Acquired?

Wipro acquired Capco on March 4, 2021. This acquisition came at a time when the IT services industry was experiencing a surge in demand due to the pandemic, which accelerated digital transformation and modernization efforts across various sectors. The strategic move aimed to bolster Wipro's capabilities in consulting and digital transformation, particularly within the financial services industry, positioning the company as a comprehensive transformation partner.

Why Was Capco Acquired?

• Market Expansion: The acquisition of Capco allows Wipro to significantly expand its market presence, particularly in the financial services and energy sectors. Capco's strong client base, including marquee names in the global financial services industry, enhances Wipro's strategic access to large financial institutions across the Americas, Europe, and the Asia Pacific.
• Technology Integration: By combining Wipro’s capabilities in strategic design, digital transformation, cloud, cybersecurity, IT, and operations services with Capco’s domain and consulting strength, clients will gain access to integrated, bespoke solutions. This integration positions Wipro as a comprehensive transformation partner, leveraging Capco’s consulting-led expertise to drive large-scale transformation deals.
• Competitive Advantage: The acquisition strengthens Wipro's competitive position by combining Capco's deep domain and consulting expertise with Wipro’s extensive delivery and execution capabilities in IT services. This unique combination provides a competitive edge in securing large-scale transformation deals, offering comprehensive end-to-end solutions that enhance market positioning and client offerings.

Acquisition Terms

• Acquisition Price: $1.45 billion
• Payment Method: Cash
• Key Conditions or Agreements:
  • The acquisition is subject to customary closing conditions and regulatory approvals.
  • The transaction is expected to close in the quarter ending June 30, 2021.
  • Capco will continue to operate independently as a wholly owned subsidiary of Wipro under the name "Capco – A Wipro Company."
  • The acquisition will be financed through internal cash and debt.
  • The integration will focus on leveraging complementary business models, sector alignment, and similar value systems.
  • The acquisition aims to create significant revenue and cost synergies, with a focus on cross-selling opportunities and integrated transformation deals.

Impact on Capco

The acquisition of Capco by Wipro has led to notable changes in operations and management. Capco continues to operate independently as a wholly owned subsidiary under the leadership of its CEO, Lance Levy. However, there have been some integration challenges, particularly cultural clashes between Capco's Western-heritage consulting approach and Wipro's India-heritage delivery mindset. Despite these challenges, the acquisition aims to leverage the complementary strengths of both companies to offer bespoke, transformational end-to-end solutions, particularly in the financial services and energy sectors.

In terms of product offerings and services, the acquisition has enabled the combined entity to provide integrated solutions in strategic design, digital transformation, cloud, cybersecurity, IT, and operations services. Employee reactions have been mixed, with some Capco consultants expressing concerns about Wipro's delivery resources. Customer reactions have also been varied, with some clients appreciating the expanded capabilities while others remain skeptical about the integration. For founders considering business transitions, tools like Sunset can assist in managing such processes compliantly, ensuring smoother transitions and better alignment of business models.