Cognizant's ambitious acquisition of Belcan raises questions

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Also Read: Cognizant to acquire ER&D services firm Belcan for $1.3 billion Surprisingly, there is a lack of clarity on some of the most elementary aspects of this acquisition. In an investor presentation, Cognizant said Belcan employed 6,500 people. Further, the presentation stated that Belcan had posted an 8% compounded annual growth over the last two years.

Although Cognizant did not disclose Belcan’s revenue in 2023, the investor presentation said that Belcan is expected to clock $800 million in revenue in 2024. But privately-held Belcan’s environmental, social and governance (ESG) reports for 2022 and 2021 paint a different picture. The 19-page ESG reports claim the company had over 10,000 employees in 2022 and 2021.

The company has not published its ESG report for 2023. When a analyst quizzed the management in a call scheduled to discuss the acquisition on Monday, Cognizant’s chief financial officer Jatin Dalal attributed this difference to “headcount fluctuation"! Integration is the biggest risk during the acquisition of a company. The task becomes more complicated when most of the employees are based in the US or the UK.

Belcan claims that 85% of its staff are in America and Europe. A second point is related to revenue. The ESG report states that Belcan had about $1 billion in revenue in 2022 and 2021.

Cognizant expects Belcan to have $800 million in revenue this year. This would imply a 20% loss from the $1 billion in revenue in 2022. Simply put, Belcan’s revenue has declined in recent years, instead of growing.