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Persistent Systems Acquires SoHo Dragon’s Assets for $4.7 Million

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Synopsis:

Persistent Systems will acquire select assets from SoHo Dragon for $4.7 million, boosting its BFSI vertical. The deal includes an upfront payment of $3.09 million and $1.49 million in an earnout. Persistent’s shares rose 2%, nearing a record ₹5,333.

Persistent System market today

Persistent Systems Ltd. has announced a strategic move to acquire select assets from New York-based software development company SoHo Dragon Inc. in a deal valued at $4.7 million. The acquisition is structured with an upfront payment and a deferred earnout plan. This deal marks an important step for Persistent in strengthening its Banking, Financial Services, and Insurance (BFSI) vertical.

PERSISTENT SYSTEMS LTD

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6477.6541.69 (0.64 %)

Updated - 13 December 2024
6492.70day high
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6345.00day low
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The financial structure of the deal

The $4.7 million acquisition includes a $3.09 million upfront payment, while the remaining $1.49 million will be paid over three years, contingent on the performance of the acquired assets. This structure allows Persistent to mitigate risk while incentivising future growth. Additionally, $0.12 million has been allocated for retaining key employees from SoHo Dragon, ensuring continuity in operations and expertise transfer.

Interestingly, the deal does not involve any shares of SoHo Dragon Inc., with Persistent acquiring only selected assets. The transaction is expected to close within 4 to 8 weeks, subject to the usual closing conditions.

Strategic Importance for Persistent Systems

This acquisition aligns with Persistent Systems' strategy to consolidate its relationship with a key customer in the BFSI segment. With the BFSI sector already contributing 31% to the company’s overall revenue, this deal further strengthens its foothold. The assets being acquired are estimated to generate annual revenue of $9.3 million, providing an immediate boost to Persistent’s topline.

Persistent Systems’ exposure to the US BFSI market, which accounts for 24% of its revenue, will benefit from this acquisition. SoHo Dragon specialises in front-office operations, data warehousing, and business intelligence, which are capabilities in high demand across the financial services industry. This will enable Persistent to offer expanded solutions to its customers, positioning the company for future growth in a competitive market.

Impact on Persistent Systems’ share price

Following the announcement of the acquisition, Persistent Systems’ stock saw a 2% increase, reflecting investor optimism in the deal’s potential benefits. The company’s share price has experienced a 12% rise over the past month and is currently trading near its recent high of ₹5,333, driven by positive sentiment across the IT sector.

With this acquisition, Persistent Systems aims to solidify its position in the BFSI sector while expanding its presence in the US market. The deal represents a calculated investment, backed by a structured earnout, and supports the company’s growth trajectory in key verticals.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

For All Disclaimers Click Here: https://bit.ly/3Tcsfuc

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