Tech Mahindra To Operate Satyam As Independent Unit - InformationWeek

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IT Leadership // IT Strategy

Tech Mahindra To Operate Satyam As Independent Unit

Key issues remain on the table as Tech Mahindra looks to move forward with the acquisition.

Executives from Tech Mahindra said Monday that they planned to operate Satyam as a standalone enterprise headed by its current leadership once their $422 million acquisition of the scandal-scarred Indian outsourcer is complete.

"Under Tech Mahindra's plans, Satyam will continue to operate as a standalone unit and its leadership will continue to drive operations," Tech Mahindra said in a statement. "We have complete confidence in Satyam's executive leadership to restore the company and take it to new levels of success."

The statement emerged as executives from Tech Mahindra on Monday met for the first time with board members from Satyam.

Up for discussion was a range of key issues about which Tech Mahindra has to date said little. Integration plans, a possible reduction in Satyam's 50,000-employee head count, and facilities consolidation are some of the matters that Tech Mahindra will need to address as it moves forward with the acquisition.

The fate of Satyam's tainted brand name is also on the table. Tech Mahindra, a relative unknown outside the telecom outsourcing arena, may want to keep the brand in order to maintain some name recognition among potential customers. On the other hand, the Satyam brand is now forever associated with one of the biggest financial frauds in India's history.

A Satyam spokesman said the company will work to minimize disruptions during the transition to Tech Mahindra. "We will take extraordinary care to ensure our service to clients continues without disruption and at the same level of excellence our customers have come to expect from us, even as we have since news of the scandal first broke," the spokesman said.

Also Monday, Tech Mahindra deposited into escrow $351 million to secure the agreement. The company is backed by Indian manufacturing giant Mahindra & Mahindra and British Telecom.

Closing the deal, which gives Tech Mahindra a 51% controlling stake in Satyam, is just the start of the challenges facing the buyer as it seeks to remove the stench of an accounting scandal that saw Satyam's founder and chairman, along with several senior executives, arrested and jailed for fraud. Indian authorities earlier this month formally charged Ramalinga Raju and several alleged accomplices with crimes including criminal conspiracy, impersonation, forgery, falsification of records, and evidence tampering.

Raju has admitted falsifying Satyam's cash position by as much as $1 billion while overstating quarterly earnings and revenue by up to 28%. Satyam may also have faked employee numbers and other data.

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