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Cognizant buys Fathom for $35 mn

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Last updated on: April 18, 2005 17:45 IST

Nasdaq-listed Cognizant Technology Solutions, a provider of IT services, on Monday announced that it has acquired all the assets of Chicago-based Fathom Solutions, L.L.C, for a total consideration of $35 million.

This is by far the biggest acquisition Cognizant has made Cognizant acquired Fathom for an initial consideration of $19 million in cash and stock. The deal also provides for a performance-based cash payment of up to $16 million on the two-year anniversary of the closing of the deal.

Until now, the largest acquisition made by Cognizant was the American Express account from Silverline Technologies for approximately $10 million. Other acquisitions like Infopulse in The Netherlands, Ygyan in Pune, and ACES in the US have all been for a consideration of under $5 million.

Cognizant has labelled all the small acquisitions it has made so far as 'tuck-under' acquisitions. "We consider the Fathom acquisition too to be a 'tuck-under' acquisition that is consistent with our acquisition strategy. We will continue to look for companies to acquire that are of a manageable size and meet our acquisition criteria," said Lakshmi Narayanan, President and CEO, Cognizant.

In acquiring Fathom, Cognizant gains complementary offerings and expertise that strengthen Cognizant's consulting practice in the telecommunications and financial services industries.

"The acquisition represents part of our successful ongoing strategy to combine industry-focused IT consulting with our top-tier onsite/offshore model," said Narayanan.

"Fathom's strong industry consulting expertise will help Cognizant build deep partnerships with leading telecommunications services customers. In addition, Fathom's IT strategy capabilities will provide Cognizant with the opportunity to engage earlier in a customer's decision cycle."

Fathom Solutions is a privately-held consulting company founded in 1999 by former Accenture executives. Fathom has achieved significant growth through an entrepreneurial culture, and has differentiating strengths in IT strategy, process design, program management, and systems integration.

According to a press release issued by Cognizant, Fathom brings a track record of high customer retention, with repeat business accounting for over 90 per cent of revenues in the past two years. Fathom's clients include major industry players in telecommunications and financial services, and the company also enjoys low attrition amongst a staff of 120 employees.

"The combined Fathom-Cognizant team brings clients a high-powered strategic partner with a compelling value proposition to provide business-aligned IT solutions. Our proven strategy expertise and consulting strengths coupled with Cognizant's leading offshore delivery capability provides clients with a unique and cost-competitive partner for delivering large, end-to-end programs," said Jeff Lee, CEO of Fathom.

A Correspondent in Mumbai