Virtusa Continues Acquisition Tear, Buys Business Processing Firm For $7.5M

Virtusa has notched its second major acquisition of the year, buying a 60-person business processing management company for stock awards and $7.5 million in cash.

Westborough, Mass.-based Virtusa, a $480 million company ranked No. 54 on the CRN Solution Provider 500, said its purchase of Atlanta-based Agora Group will make it easier to broaden and deepen its relationship with existing clients, and win more business transformation deals.

"This makes perfect sense with the direction Virtusa is heading, the strength that we have in transformational programs and the pipeline that we see," Raj Rajgopal, Virtusa's president, said during the company's earnings call Tuesday.

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Rajgopal specifically praised Agora for its strong client-facing teams in program management and architecture, and said the deal should allow Virtusa to add some new enterprise clients in the banking and financial services space. Minimal overlap exists between Virtusa's and Agora's client lists, according to Virtusa CEO Kris Canekeratne.

In addition to the $7.5 million purchase price, Virtusa has agreed to give up to $2.9 million in restricted stock awards to some Agora employees, the company said. Virtusa also deposited $900,000 into escrow for a year as security for Agora's indemnification obligations.

Agora is expected to generate $1.7 million of revenue for Virtusa next quarter and $10 million of sales over the next nine months, according to the company. Agora will contribute 3 cents per share to Virtusa's bottom line over the next nine months after restructuring and amortization costs are excluded.

Agora's earnings have been lower than Virtusa's, Rajgopal said, though the company expects to change that by driving a lot of synergy-related revenue. Growth rates at Agora have been in the mid-to-high teens over the past two years, he added.

Agora was founded in 2000 and specializes in implementing and integrating business process management solutions. Folding the company into Virtusa should provide more business and additional strength in areas where the company already enjoys a solid pipeline, according to Rajgopal.

The Agora deal comes just three months after Virtusa paid $34.2 million in cash and $3.2 million in earn-outs to acquire 200-person consulting and infrastructure services provider Apparatus.

Virtusa has been using acquisitions to fuel its rapid growth, with sales climbing 21 percent in the most recent years as the company leapt from No. 71 to No. 54 in the CRN SP500 rankings.

PUBLISHED JULY 29, 2015