Scaled Acquisition in Engineering Begins as HCL Purchases Geometric

We predicted in our 2015 Engineering Services Blueprint Report that mergers and acquisitions will be the flavor of the year as the engineering marketplace becomes more strategically important to leading service providers. We also suggested one of our “Winner’s Circle” service providers, HCL, was very likely to to consider acquisitions as a means by which to grow. HCL is indeed very active in engineering acquisitions have announced two small engineering services purchases (Trygstad Technical Services and Concept to Silicon Systems) in the last few months, HCL is stepping it up by acquiring Geometric, a leading niche engineering service provider.  HCL will acquire Geometric after demerger of Geometric’s JV with Dassault Systemes, 3DPLM Software. As a result, HCL will jump up one spot in HfS Engineering Services Top 20 Rankings.

Geometric, headquartered in Mumbai, reported $185 million in revenue during last year (January – December 2015) and employed 4,755 skilled resources across 13 global delivery locations in the US, France, Germany, Romania, China and India. The company’s portfolio covers global engineering services, product lifecycle management (PLM) solutions, embedded systems solutions, software solutions, and intellectual property (IP) led technology and products.

This is more than a scale acquisition. In addition to the jump in global rankings, Geometric will augment HCL’s engineering capabilities too.

Specifically, HCL with the acquisition of Geometric will get access to:

1. Nearly 4000 skilled and hard to find engineering resources 
2. Marquee clients in automotive, aerospace, heavy engineering, machine tools, and oil and gas verticals 
3. Strong relationships with leading CAD & PLM ISVs 
4. A portfolio of IP led products and solutions
5. Strong capabilities in the PLM services segment

In India, there is an increasing spotlight on engineering services as it is the fastest growing segment in Indian IT services for last two years according to NASSCOM. Many of the leading service providers are strengthening their capabilities through acquisition although most deals have been relatively small in 2014 and 2015. This is the first recent scaled acquisition that actually leads to noticeable consolidation in the engineering services market.  Consolidated scale is becoming important in engineering services as it allows service providers to invest in engineering labs, tools, infrastructure, new technologies, domain knowledge, patents, etc.  The push to greater economies of scale will impact niche service providers that will need to evaluate their roadmap to growth leading to a review of strategic options to either become an acquirer or pursue being acquired. We predict that as engineering services evolves from a niche offering to the mainstream, we will hear more such acquisition announcements. Meanwhile, it will be interesting to see how HCL integrates Geometric and leverages the potential synergies.