Infosys could turn sights on SEAL Consulting in wake of failed Axon bid, sources say

* SEAL's SAP development capabilities attractive to Indian IT companies
* Other potential suitors could include HCL Technologies, Ramco Systems, Patni Computer systems and L&T Infotech
* Infosys has worked with ABN AMRO, Royal Bank of Scotland, Ashurst, and Linklaters in the past
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Infosys (NASDAQ:INFY), based in Bangalore, India, could set its sights on SEAL Consulting after having lost its bid for Axon to HCL Technologies, said industry sources. 
SEAL, an SAP services provider based in Edison, New Jersey, has similar capabilities to Axon, the sources agreed. With 400 employees, it is about one-fourth the size, but could still provide a suitor with a decent market entry and client list, one industry executive explained. A banker estimated SEAL’s revenue at just under USD 100m. 
Infosys, with a USD 14bn market capitalization and USD 1.9bn in cash, would be open to acquisitions in the SAP space or other subsectors, a company insider said. The company will continue to seek acquisitions in SAP-related spaces, CFO V Balkrishnan said in the company’s most recent earnings call. SAP is one of the fastest-growing segments of its business, he added. 
But SEAL CEO Badal Patel said the company is not actively seeking a sale, and would only be interested in selling under very specific circumstances. "We have to have a right fit, the acquirer would really have to understand us and the deal would have to give our employees growth and career opportunities." 
SEAL’s capabilities are attractive to potential suitors, said a second industry executive. Installing, integrating and customizing SAP’s enterprise resource planning (ERP) software is a long-term engagement that provides stable and ongoing cash flows. 
Along with Infosys and HCL, an Indian banker identified Indian-based companies Ramco Systems, Patni Computer Systems and L&T Infotech, a subsidiary of conglomerate Larsen & Toubro, as other potential bidders for SEAL. 
But Infosys is the most logical bidder, as 12% of its revenues come from its SAP-based business, an Indian-based analyst said. HCL Technologies could be distracted by the Axon deal, Ramco may not have sufficient funds to make an acquisition, and if SEAL were to ask for more than two times revenues, in line with the Axon deal, Patni might find the valuation too high, the analyst added. 
SEAL’s Patel stressed the company was not for sale and is doing well in the soft market. "We have always thought that either we become part of another name brand and grow through that, or we take a different route, making our own acquisitions." 
The Axon bid was a bold move for the two Indian bidders, US bankers agreed, particularly as the final acquisition price of GBP 440m represented a multiple of more than two times revenue. Industry sources said they expect to see continued pursuit of US or European companies in the SAP service space. 
Infosys has worked with ABN AMRO, Royal Bank of Scotland, Ashurst, and Linklaters in the past.