Coforge (COFORGE) M&A Announcement summary

Deal rationale and strategic fit

• Acquisition creates a $2.5 billion tech services powerhouse with a strong focus on AI-led engineering, cloud, and data services, targeting Fortune 1000 and digital-native clients.

• Encora brings an AI-native platform and deep expertise, expanding presence in high-growth verticals such as Hi-Tech, Healthcare, BFSI, pharma, medtech, and healthtech.

• The deal immediately scales up Hi-Tech and Healthcare verticals, each reaching $170 million in run-rate business.

• Enhances global delivery with approximately 44,000 employees and significant expansion in LATAM and North America, especially the US West and Midwest.

• Both capability and client portfolio were key drivers, with Encora adding 11 new $10 million+ tenured client relationships.

Financial terms and conditions

• Enterprise value of the transaction is $2.35 billion, with $1.89 billion paid via equity shares through preferential allotment.

• Sellers, including Advent International and Warburg Pincus, are rolling over their stakes and not taking cash consideration.

• Encora shareholders will hold approximately 20%-21% of the merged entity on a fully diluted basis.

• Share price for the transaction is set at $18.15 per share (INR 1,815.91), an 8.5% premium to the current close.

• Coforge may use a QIP or other funding options to retire Encora's existing term loan; closing expected in 4-6 months.

Synergies and expected cost savings

• Significant revenue and cost synergies anticipated, including cross-selling technology service lines and expanding into Advent and Warburg portfolio companies.

• Cost synergies of $20 million assumed, driving a ~90 bps increase in combined EBITDA margin.

• Only a 2 percentage point margin improvement is targeted, mainly from G&A and operational synergies.

• Tax benefits from amortization in the US estimated at $4 million for FY27.

• AI-led engineering, data, and cloud services projected to deliver $2 billion revenue in FY27.