In $ 9.5 billion deal, Hitachi acquires software engineering company GlobalLogic
Japanese industrial giant Hitachi Ltd. signed a $ 9.5 billion deal to acquire GlobalLogic Inc., a California-based software engineering company that develops applications for large enterprises.
The agreement, ad today, is expected to close by the end of July.
Tokyo-based Hitachi is a major player in the industrial sector, manufacturing products ranging from auto parts to elevators. It also maintains a significant presence in the information technology market through its Hitachi Vantara business. The subsidiary sells data storage hardware and hyperconverged infrastructure appliances, as well as software products such as analytics applications.
The acquisition of GlobalLogic is poised to significantly expand Hitachi’s presence in the IT market. GlobalLogic, which is on track to generate approximately $ 1.2 billion in revenue this year, helps organizations build new software applications to support their technology initiatives. The company’s customer list includes Qualcomm Inc., Oracle Corp. and other big tech companies, as well as hundreds of other companies.
Along with the technology industry, GlobalLogic counts the industrial and automotive sectors among its primary target markets. Hitachi has a strong presence in both areas. The deal could create new upselling opportunities for Hitachi by enabling it to promote GlobalLogic offerings to customers of its industrial products and vice versa.
It should be noted that the areas of expertise of GlobalLogic encompass many fast-growing software trends that companies prioritize in their IT roadmaps. In the manufacturing sector, the firm helps clients implement digital twins, simulations of industrial equipment that can be used to improve operations. GlobalLogic is also working on artificial intelligence initiatives, among other types of projects.
In addition to coding expertise, the acquisition should enable Hitachi to acquire a portfolio of software products. GlobalLogic offers a toolkit that makes it easy to set up cloud-based analytics environments, a set of software building blocks for building embedded applications, and other specialist offerings. Hitachi may seek to expand this part of GlobalLogic’s business as a result of the deal as software can be a valuable source of high-margin revenue.
Hitachi underscored GlobalLogic’s profitability in announcing the acquisition. The software engineering firm is expected to close the current fiscal year with adjusted profit margins north of 20% before interest, taxes and depreciation. Hitachi added that GlobalLogic will aim to achieve adjusted earnings of more than $ 1 billion by fiscal year 2028, also before interest, taxes and depreciation.
The $ 9.5 billion Hitachi agreed to pay for the company includes roughly $ 1 billion in debt. Hitachi plans to finance the acquisition with a combination of cash and bank loans.
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