Indian IT services giant HCL Technologies Limited announced that it will acquire U.S.-based engineering, design, and consulting firm Butler America Aerospace for $85 million U.S. (HCL Technologies Ltd.).
Per HCL Technologies’ press release:
Butler Aerospace serves customers primarily in the Aerospace and Defense industries in the US, to whom it provides Engineering & Design services in the areas of Mechanical and Structural Design, Electrical Design, Tool design and aftermarket engineering services.
If this acquisition secures the approval of the Committee on Foreign Investment in the United States (CFIUS), it will be complete by the end of this year.
Notes & Comments:
In August, Tata Technologies Limited listed the secondary and tertiary supply chain acquisitions as key to its growth in the American defence services market. On Quwa, engineering consulting firms were viewed as probable short and medium-term acquisitions for Tata Technologies. HCL Technologies’ acquisition of Butler Aerospace places this company in the direct competitive sight of Tata Technologies.
As stated in an earlier article, the focus of these acquisitions will be on secondary and tertiary players in the U.S. defence market, e.g. consulting firms, subcontractors, etc. By terming the acquisition as EPS accretive, HCL Technologies is confident that the acquisition will be conducive for its growth and viability.
Similar sentiments were shared by Tata Technologies (albeit generally), which makes the Butler Aerospace acquisition interesting in the sense that its clearance (or denial) with CFIUS could impact the interest of other Indian companies in this space. In other words, the approval of this acquisition could result in other acquisition attempts by other Indian players.
Acquisitions/partnerships by private players such as L&T, Tata and HCL could pay dividends in the future if these acquisitions are leveraged into developing the domestic ecosystem in an appropriate fashion. Initially they might not be so rewarding but getting embedded into those ecosystems is rewarding as shown in the case of Turkey.