Tech Mahindra to acquire AI firm Zen3 in all cash deal

Pune-based information technology services firm Tech Mahindra will acquire artificial intelligence-focused Zen3 Group for $64 million in an all-cash deal.

The company will pay $42 million at the time of the closure of the deal while the balance $22 million will be paid over the next three years depending on the financial performance of Zen3.

The deal, which is likely to close by April 1, includes the acquisition of flagship company Zen3 Infosolutions (America) and its Indian arm Zen3 Infosolutions, a statement said.

Seattle-headquartered Zen3 offers its services through its three flagship products.  Datamime, which collects and curates data across multiple media formats in 20 languages. Its database migration assessment tool AcuityPath helps companies manage data workflows. Its third flagship product, Sayint, is a speech analytics platform that gathers helpful insights from customer conversations.

Zen3 counts several large corporations from across sectors such as Amazon, Disney, Microsoft, Apple, KPMG, EY, and Deloitte among its customers. It has offices in Dublin, Bengaluru, Hyderabad and Visakhapatnam, employing 1,300 people.

The company was founded in 2016 by Manoj Kanumuri, who holds the post of chairman and CEO in the company. Kanumuri has previously worked with Microsoft and has experience in several operating systems, machine learning, big data, speech, and search products.

This is the second acquisition by Tech Mahindra in the calendar year so far. On January 31, the company bought a 70% stake in integrated circuit and embedded software design service provider Cerium Systems in an all-cash deal for Rs 245 crore (around $34 million).

On the same day, Tech Mahindra reported a 6.4% sequential growth in its consolidated revenue for the quarter ended December 31 and a 2% growth in its net profit.  The company posted revenue for the financial year 2017-18 at $38 million, while its revenue for the six months between January to June in FY19 was at $ 25 million.

Recently, software industry association Nasscom predicted a muted growth of 7.7% for the Indian IT sector in FY20, marginally higher than the 7% growth last year. However, it had then said that it had not considered the full impact of the then-nascent coronavirus at the time of the study. The virus, which was so far restricted mainly to China, has now spread to the Middle East and Europe stoking fears of a global recession.