• Chesapeake Group

Hitachi to acquire GlobalLogic



Overview:

On 31 March 2021, Hitachi announced that it will acquire GlobalLogic, a leading digital engineering services company for $9.6bn in cash.


This acquisition will accelerate the digital transformation of social infrastructure on a global scale by integrating GlobalLogic’s advanced digital engineering services with Hitachi’s Lumada portfolio, its advanced digital solutions, services, and technologies business.


The transaction is expected to be completed by the end of July 2021.


About Hitachi:

Headquartered in Tokyo, Japan, Hitachi, part of the Hitachi Group, is focused on its social innovation business that combines IT, operational technology (OT) and products. It drives digital innovation across five sectors – Mobility, Smart Life, Industry, Energy and IT – through Lumada.


About GlobalLogic:

Founded in 2000, GlobalLogic is a digital engineering services company. It provides full-lifecycle product development services, UX design, product design, content engineering, product research & ideation, sustaining engineering, product engineering, product testing & quality assurance, and product re-platforming services.


The company has a client base of over 400 clients comprised of market leaders and marquee brands across key industries such as communications, financial services, automotive, healthcare & life sciences, technology, media and entertainment, and manufacturing.


It is headquartered in San Jose, CA with offices in 14 countries around the world.


Transaction overview:


The transaction will be completed at an enterprise value of $9.5bn, representing an EV / Revenue multiple of 7.9x and an EV / adjusted EBITDA multiple of c.39.6x based on FY 21 estimated financials. The total acquisition cost, including repayment of GlobalLogic’s interest-bearing debt, is expected to be $9.6bn.


In May 2018, Partners Group acquired a joint lead ownership equity stake in GlobalLogic, along with existing investor, Canada Pension Plan Investment Board, at an enterprise value of $2bn. Partners Group and Canada Pension Plan Investments each hold an equity ownership interest of c. 45% in the business and will both be exiting as part of the transaction. This exit of Partners Group comes at a money multiple of 5x and an IRR of c.75%.


The transaction will use the reverse triangular merger method wherein MergeCo H Global, a subsidiary of Hitachi Global Digital Holdings Corporation (HGDH) will pay the acquisition consideration to GlobalLogic Worldwide Holdings and will merge into it, making GlobalLogic a wholly owned subsidiary of HGDH.


The addition of GlobalLogic’s advanced digital engineering capabilities, and its strong client base including major technology companies, will strengthen the digital portfolio of Hitachi’s Lumada business.


It also speeds up the global expansion of Lumada through utilizing existing GlobalLogic sites as Collaborative Creation Hubs.


The Chesapeake Group was not an advisor in this transaction.