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Core LTM acquires Randstad’s tech services business However, vertical-led M&A may not be the best fit for the new age

* LTM announced the acquisition of Randstad’s technology services business in Europe and Australia with annual revenue of ~€469m (~USD500m), adding ~10% to LTM’s revenue base. The acquired business has 2,900 billable employees with a strong onsite/nearshore presence, largely in Europe (78% of revenue) and Australia (22%). Its revenue has declined ~12% over the last two years due to the macroeconomic weakness in Europe, some client insourcing via GCCs, and pruning of smaller accounts, though management sees scope to stabilize and grow through cross-sell and offshore mix addition.

* Transaction details: LTM will acquire the business for ~€160m, implying ~0.3x EV/Sales, which appears inexpensive. The deal is structured as a broader partnership with Randstad, including

(1) acquisition of the tech services business

(2) a 5-year GCC/AI transformation deal (~€50–60m TCV) for Randstad’s India GCC

(3) strategic talent MSP to support sub-con cost optimization. The deal will use only ~10–15% of LTM’s cash and is expected to be EPS neutral

Cross-sell and offshore-mix will be a key monitorable

* The acquired business is largely onsite/nearshore, while LTM brings offshore muscle. There is scope to cross-sell LTM capabilities into these accounts. We believe the shift, however, will depend on how quickly offshore can be introduced into existing engagements.

* Client concentration is high, with the top 25 clients contributing ~65% in Europe and the top 10 contributing ~80% in Australia (further tail pruning is largely behind), but this is broadly in line with LTM’s focus on scaling large accounts

Opens new verticals/geos; capability intensity still limited

* The deal adds exposure to new verticals/geographies, including European telecom, aerospace, auto, utilities, and Australian BFSI. It also brings capabilities in cybersecurity, IoT, and domain-led engineering, along with access to regulated sectors with securitycleared talent.

* In our view, this helps LTM enter some new areas, especially in Europe. Post-close, Europe is expected to scale to a ~USD1b+ business for LTM, while Australia is expected to cross ~USD100m in revenue. That said, the capability set still looks largely services-led, and deeper differentiation in newer areas (like AI-led offerings) will need to be built over time

Valuation and view

* The deal gives LTM access to marquee clients in Europe and Australia, which is useful from a market access standpoint.

* However, we think this is a phase where acquisitions need to be more capability-led, especially around AI, rather than just geography or accounts. On that front, this deal looks more traditional.

* AI-led implementation opportunities will likely build over time, but it is not clear if value will accrue to traditional IT vendors in the same way as before. The model itself is evolving. We are seeing early signs of a different template emerging - platform-led, AI-native players (for example, efforts like OpenAI’s DeployCo or similar structures from Anthropic).

* We would watch for vendors who can move in that direction. The next 12–18 months could see more M&A focused on building such capabilities. We value the company at 23x FY28E EPS, implying a TP of INR5,400 and ~35% upside. Reiterate BUY.

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