Inside Capgemini's $3 billion deal for WNS: All you need to know

Time of India

08-07-2025

French IT services major Capgemini is keen on building its business process outsourcing (BPO) muscle with its latest acquisition: domain leader WNS . The deal, announced on Monday, will see the two companies pool their capabilities to address the growing enterprise demand for advanced, automated services.Concerns, however, remain over the prospects. Analysts and investors are worried about the impact of artificial intelligence (AI) on the BPO sector, and the subsequent hit on revenue from the vertical. Capgemini shares reflected these worries during yesterday's trade.We take a look at the bones of the deal, and it's likely implications:Capgemini had agreed to pay $76.5 for each WNS share, which amounts to $3.3 billion (about Rs 28,280 crore) in cash. This is 17% higher than the closing price of the shares on July 3. They rallied 14% on Monday.The IT major has secured bridge financing of €4 billion to pay this sum, as well as meet some other obligations. It will refinance the bridge with €1 billion cash and the rest through debt issuance.The boards of both companies have consented to the deal, which now awaits approval from WNS shareholders and regulators. It is expected to be closed by the end of 2025.Capgemini expects the acquisition to immediately boost its revenue and margins, projecting a 4% rise in earnings per share (EPS) in 2026 and 7% the year after. It sees projected revenue synergies between €100–140 million ($117.8–164.9 million), and an annual pretax run rate for cost and operating model synergies of between 50 million and 70 million euros by the end of 2027.Acquiring WNS's $1.3 billion in revenue will be a drop in Capgemini's $25.5 billion business. It will, however, raise the headcount of the combined entity by a whopping 19%—an indication of the manual nature of WNS's work.The deal comes at a time when enterprises are looking to replace people-intensive business operations with AI-driven solutions for lower costs and efficient execution. Pure-play BPO companies lack the technical knowhow to address this demand, according to HFS Research founder Phil Fersht. That is a gap the Capgemini-WNS combine can capitalise on.'By combining consulting, technology, and domain-driven BPO, Capgemini + WNS has the potential to lead AI-powered business transformation, with a robust incumbent WNS client base hungry to replace full-time equivalents (FTEs) with technology solutions,' he wrote.The combined entity could compete on an equal footing with Accenture, and outcompete the Big 4 of consulting — PwC, EY, KPMG and Deloitte, Fersht noted."From a competitive perspective, another potential big win for Capgemini is its new positioning against the Big 4, which have traditionally dominated consulting and technology services. With WNS's operational expertise integrated into its offerings, Capgemini could deliver end-to-end transformation services that the Big 4 cannot – and at lower price points," the analyst wrote.Some analysts, and investors, are worried about the impact generative AI could have on the BPO sector, which Capgemini is looking to tap, noted brokerage house Morgan Stanley.The bear case is that AI would transform BPO from a people-intensive business to one that is much more highly automated and managed by software, the brokerage noted. This could lead to a fall in BPO revenues and expose incumbent vendors to competition from new entrants, it said.Disrupting BPO space with generative AI is an opportunity that investors might favour, but there needs to be evidence that WNS is the right vehicle for such a change, Morgan Stanley said.Also, while WNS is unlikely to prove transformational for Capgemini's business, the acquisition cost will weigh on the IT major's balance sheet for a couple of years.Started by British Airways in 1996 as a captive unit, WNS offers BPO and data analytics services to blue-chip clients, including Coca-Cola, T-Mobile, United Airlines, Aviva, British Gas, Virgin Atlantic Airways, M&T Bank, Centrica and McCain Foods.It serves over 700 clients with a 64,000-strong workforce operating in 13 countries through 64 delivery centres.WNS reported a better-than-expected but marginal 0.6% drop in revenue at $1.31 billion for fiscal year 2025, with an 18.7% operating margin. Profit increased slightly to $170.1 million, from $147.5 million the previous year. Revenue has grown by around 9% in constant currency terms, on average, over the last three fiscal years. It also acquired Kipi.ai for $63.4 million in the March quarter to expand its capabilities in data, analytics, and AI.