Deal focus: GPs pile into US-India tech corridor

When TA Associates acquired US and India-based IT services provider Accion Labs in 2020, it had the option to buy out 100% of the position of Basil Partners, the Singapore private equity firm that had seeded the company in 2011. But it didn’t want to break up the team.

Accion’s founder and CEO, Kinesh Doshi (pictured left with co-founders Sandesh Sukumaran and Tony Kernan), spent a formative period of his career working alongside Rajeev Srivastava, Basil’s executive chairman and managing partner, at Apar Infotech in the US. The Insight Partners and Warburg Pincus-backed company was considered a pioneer in outsourced IT product development.

When Doshi set up Accion with support from Basil a few years later, there was a flurry of talent acquisition-focused M&A activity but never with an aim of taking 100% control. These were cash-and-stock deals aimed at developing synergies and mutual growth.

“TA liked that approach when they came in, and that’s the reason they requested us to hold back a minority shareholding in the company – to continue to work with them in terms of driving the next level of growth,” said Sameer Kanwar, a partner and CEO of Basil, a former board member of Apar, and an advisor to the Accion board.

The next chapter of growth will be largely fuelled by a USD 93m investment led by True North, which is taking a significant minority stake. TA, Basil, and management are all selling shares in the transaction, diluting their holdings by the same percentages, with TA retaining a majority position.

Accion’s expertise spans a range of enterprise digital transformation themes, including using experience design, artificial intelligence and big data analytics systems, cloud migration, and re-engineering legacy platforms. Customers are primarily in the US and Europe. The business is said to be growing more than 20% a year.

The investment comes on the back of a significant growth streak. In the past two years, Accion has increased its headcount from 2,250 to 4,800 and expanded from 12 offices to 20. India, with five offices, remains the dominant product delivery location, but high turnover in the industry locally has inspired geographic diversification. The Asia footprint now also includes Singapore and Malaysia.

Accion’s key differentiation is in the sales department, which is not run by salespeople. In this model, the company’s top technologists – including Doshi and his chief technology officer – take time out of their day jobs to work on sales initiatives. They present prototypes, not slideshows. And there’s a continuity in client relations as subsequent meetings progress and get more technical.

“Kinesh’s philosophy is very clearly that everybody in front of the customer needs to understand either technology or business,” Kanwar said. “The customer realises, here are a bunch of technologists who understand emerging technology and the pain points – and they have a solution and an approach to suggest, rather than just a salesperson walking through a presentation.”

There has been only one bolt-on since the TA investment, but it was Accion’s largest yet, reflecting an increased capacity for deal sourcing and structuring. India-based e-Zest Solutions, a similar operator with attractive European connections and healthcare capacities, was acquired last year for an undisclosed sum. A pipeline of possible entries into other markets is being explored.

True North’s support for this model after more than a decade of private equity guidance speaks volumes about the enduring appeal of IT services. Indeed, Accion was one of the star assets in a stapled secondary transaction in 2018 that saw Basil roll over six portfolio companies into a new vehicle backed by NewQuest Capital Partners and Committed Advisors.

So, is a sale to another private equity firm the most likely exit? “It’s all up in the air,” Kanwar said. “The very fact that TA and Basil have continued to work with the company, and that True North has just joined, you could appreciate that all of us feel there is still a lot of potential for growth rather than exiting too early. It’s the right platform for building.”

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• Topics
• North America
• South Asia
• Technology
• Expansion
• USA
• India
• True North
• TA Associates
• Basil Partners
• digitalization
• Secondaries