Brazil seen as epicenter of M&A activity in IT service sphere this year

- Friday, January 21, 2011

Brazil seen as epicenter of M&A activity in IT service sphere this year

Brazil will represent a main focal point of M&A activity among IT service providers this year, international tech consultancy IDC's IT service manager for Latin America, Mariana Zamoszczyk, told BNamericas.

Moves such as French technology services consultancy Capgemini's acquisition of Brazilian IT services firm CPM Braxis are just the tip of the iceberg, according to Zamoszczyk.

"The scope of business in Brazil is extremely significant," she said. "There are a lot of local players, which are companies that provide services to the local market and perhaps don't have operations outside of Brazil. These companies are attractive for analysis when an international service provider starts looking to increase its penetration in the Brazilian market."

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Other countries that could play host - though in lesser degree - to M&A activity include Mexico, Argentina, Chile and Colombia.

Zamoszczyk noted that, aside from multinationals, Latin American IT service companies will be pulling the trigger on acquisitions this year. BNamericas previously reported that Latin American heavyweights currently on acquisition hunts include Brazilian IT firm Stefanini and Chilean IT systems integrator Sonda.

OUTSOURCING BOOM

IDC expects Latin America's overall IT service market to increase 9.2% this year, reaching US$21.3bn. The outsourcing market alone is expected to grow 11.5% in 2011 - the highest growth rate in Latin America's IT services sector.

"It is possible that we will see many projects currently being carried out in India shift to Latin America," Zamoszczyk said. "The idea among multinationals is to diversify the countries where they are carrying out different projects. I think that Latin America will gain a lot of ground."

The analyst added that IT service growth will also occur in other areas aside from outsourcing, such as hosting, help desk and application management. Geographically, Brazil and Chile will be hotbeds of business this year, followed by new arrivals such as Colombia and Peru.