Quick Note - Persistent Systems (PSYS IN) (Neutral) - Announces business combination with Nagarro

Research evidence excerpt

Quick Note - Persistent Systems (PSYS IN) (Neutral) - Announces business combination with Nagarro

employees across 40+ countries.

2. The acquisition will open new markets for both entities and achieve at-scale presence in North

America (USD1.7bn revenue) and Europe (USD600mn+ revenue), according to Persistent.

3. Persistent — Nagarro Group will establish strong presence across all verticals with scaled

presence (USD 500mn+) in 3 verticals: BFSI, HLS and TMT; strong presence across Industrials

(USD 400mn+) and Consumer (USD 300mn+).

The company intends to share more details on synergies post the deal closure and expects the deal

to be EPS accretive from year 1 (excluding transaction costs).

How is Persistent financing this?

The deal is an all-cash transaction. Persistent has already bought a 21% stake from its largest

shareholder, ~13-14% committed tendering from the management team and will initiate an open

tender offer to the other shareholders at EUR81/share (a 140% premium to the close price of June

25 and a 94% premium to the last 3-month volume weight average), implying an equity value of

EUR1bn and EV of EUR1.2bn. Persistent has secured a bridge loan of EUR1.4bn to finance this

acquisition, which it expects to close by 4Q CY26 or 1Q CY27E subject to regulatory approvals and

at least securing 50%+ shares in the open offer. Management has clarified it does not intend to raise

equity to finance this acquisition for now although it may look at asset-level financing.

Our view — seamless integration key to creating long term value, retain Neutral

We think this acquisition fits Persistent’s goal of reaching USD5bn of revenue by FY31E with higher

presence in Europe. However, given the large size of the transaction (~67% of its existing size), a