BENGALURU: Responding to concerns over unusual trading activity in Munich-based IT firm Nagarro’s shares ahead of the deal announcement, Persistent Systems CEO Sandeep Kalra said the company followed “a very strict protocol” and tightly controlled access to the transaction. His comments came after Nagarro chief executive Manas Human told Reuters that he expected Germany’s financial regulator, BaFin, to investigate the sharp rise in Nagarro’s stock before the takeover was announced. Nagarro’s shares surged nearly 20% to € 40.4 on Friday, hours before the two companies unveiled the $1.3-billion deal after market closing. On Monday, the stock jumped another 88% to around € 76, nearing Persistent’s offer price of € 81 a share. “We had a very small team working on the transaction. Between Persistent and our advisory teams, the process was very tightly controlled,” Kalra said. “I have no other comments to make because I have no idea what may or may not have happened elsewhere. I would be very disappointed and shocked if anything had leaked from our side. There’s also no reason for people in India or within our teams to trade because they have zero trading capability in Germany.” Persistent’s all-cash bid for Nagarro would create a $2.9- billion digital engineering and AI company with more than 46,000 employees. The market, however, reacted cautiously. Persistent’s shares fell nearly 11% on Monday to a near 15-month low as investors and analysts flagged concerns over the acquisition’s size, integration risks and Nagarro’s lower margins. “That’s something you see with almost every large acquisition. The initial reaction is often not positive because investors don’t necessarily understand the strategic rationale immediately. Their first response is usually: it’s too big, it’s happening in a difficult environment...,” Kalra said. He said the deal represented a rare opportunity and that Persistent may not have been able to pursue an asset of Nagarro’s scale in a stronger market. He pointed to Persistent’s track record of 24 consecutive quarters of above 3% sequential growth, saying the transaction would prove accretive over time. Persistent had long maintained that any large-scale acquisition would likely be in Europe, with only 8.5% of the company’s revenue coming from the region. Now the combined entity will derive around 65% of its revenue from the US and 22% from Europe.
