Peoplebank Open iGate to Big League

Article appeared in: Australian Financial Review
Author: David Crowe
Date: 9th June 2004

The contracting agency Peoplebank has acquired the local operations of its global rival, iGate, in a deal that vaults the Australian company into the big league of technology recruiters.

The acquisition expands Peoplebank to annual turnover of about $100 million from its roll of about 800 billable contractors.

The deal is the company’s fourth purchase in the past few years and signals its plan to compete directly with larger rivals such as Candle, the listed recruiter with $162 million in annual sales.

Westpac’s private equity arm, Quadrant Capital, has backed the contracting company with convertible debt to buy iGate and possibly other companies in the future.

For iGate, which is based in the US but has a large Indian operation, the deal is the latest step in its plan to divest its contracting subsidiaries and focus on business process outsourcing and computer services.

Outsourcing services will continue to be offered in Australia by another iGate subsidiary, iGate Global Solutions.

Peoplebank founder Leon Lau said yesterday that staff were being transferred from iGate offices to Peoplebank after the signing of the agreement on June 1, which ended about five months of negotiation.

The iGate contracting business was built on the foundations of a Canberra contracting company acquired in 1986 and operates in Brisbane, Canberra, Melbourne and Sydney but is especially strong in the federal government market.

The iGate business process outsourcing operations continue in Australia under the name iGate Global Solutions, a sister company also owned by Pittsburgh company iGate, which is listed on the Nasdaq.

“This does not affect the local operations of iGate Global Solutions in any manner,” said Ajith Madhavan, practice development manager at iGate Global Solutions. “Our offices will continue to operate in Sydney and Melbourne as before and service clients nationally.”

The outsourcing company has made clear its intention to build up its services operations in Australia.

The chief executive of iGate Global Solutions, Phaneesh Murthy, said in Sydney in April that he would form alliances with Australian companies to create new outsourcing services.

Peoplebank, founded by Mr Lau in 1990, has bought rival agencies DMA in Sydney, Leaders in Brisbane and Gambit National in Adelaide. A year ago it had annual turnover of $40 million but Mr Lau said that would rise to $100 million once the iGate operations were absorbed.

Peoplebank would grow from 35 to 60 permanent staff, he said.

Mr Lau said the company had 800 billable contractors at work. The company also had a small business in placing permanent technology staff.

The value of the deal was not disclosed. An announcement by iGate in the US said the company collected $US10 million ($14 million) from the sale of both iGate Australia and another subsidiary, Direct Resources Scotland in Edinburgh.