OREANDA-NEWS. IBS Group announced the merger of its IT services division with Borlas, a leading Russian IT consulting company. The merger was structured as a share swap: Borlas' shareholders received 23% of the consolidated company, and IBS Group's stake in decreased to 77%. The acquisition increased IBS Group's 2006 pro-forma revenues by about 14%.

Aton Capital's market researchers view the deal as positive for IBS Group for a number of reasons: The deal materially enhances the market position of the IT services division; the consolidated company has a 7% share in the Russian IT services and consulting segment, including about 20% in business applications;
there are synergies related to the customer base (Borlas has a strong footprint in telecoms and metals, where IBS has limited exposure) and the services offered (Borlas specializes on IT consulting, while IBS targets IT services).

The experts expect a positive impact on IBS Group's margins, given above-industry average profitability of IT consulting, since Borlas' main strengths are: management indicated a possible savings on G&A of up to 10%; the price paid seems reasonable; IBS issued 30% in additional shares, which in terms of EBITDA translates into $6.6mn; given Borlas' estimated $100mn in revenues in 2006 and assuming an EBITDA margin of 8%-10% (typical for IT consulting), IBS paid less than one dollar per each dollar of Borlas' EBITDA. "We plan to incorporate the deal into our model on IBS Group shortly. We have no formal recommendation on IBS Group; our indicative 12-month valuation is $47 per GDR," the experts recapitulate.