Hyderabad :   Virtusa Corporation ,a global IT services company that combines innovation, technology leadership and industry solutions to transform the customer experience, today announced that it has acquired all the outstanding shares of TradeTech Consulting Scandinavia AB and its subsidiaries (“TradeTech”), headquartered in Stockholm, Sweden.   TradeTech is a leading consulting and IT services provider specializing in treasury and asset management for major financial institutions and multi-national corporations, primarily in the Nordic countries.

The acquisition expands Virtusa’s leading position within the banking, financial services and insurance industries by increasing its asset management and treasury services domain and technology expertise.   With 60 team members, TradeTech’s core strengths include technology consulting, regulatory & compliance, implementation of global asset management and treasury platforms, as well as managed services.  With the addition of TradeTech, Virtusa plans to leverage these complementary capabilities across its global client base, enabling Virtusa to offer a broader set of services to existing and new clients.

TradeTech expects to immediately extend Virtusa’s presence within Europe, expanding Virtusa’s global footprint into the Nordics, a large and growing IT services market primed for increasing its use of outsourcing.  TradeTech clients will continue to benefit from local operational support and now will have access to Virtusa’s global delivery model and broader services capabilities.

Kris Canekeratne, chairman and CEO of Virtusa, stated, “We are pleased to welcome Joakim Wiener, the TradeTech team members, and their clients to Virtusa.  The complementary expertise that TradeTech delivers will help increase our total addressable market and provide our combined client base with expanded service offerings.  In addition, this acquisition is an important step in establishing Virtusa in the Nordic countries and providing a broad set of best-in-class consulting and outsourcing service to this region.”

Joakim Wiener, CEO of TradeTech, stated, “We are pleased to join the Virtusa team and believe this is a tremendous opportunity to extend our services globally.  We share a common culture based on a commitment to innovation and service excellence that will help our combined clients accelerate their business outcomes.”

TradeTech was advised by Incepto, a Nordic-based corporate finance advisory firm specializing in M&A transactions.

Financing Summary

Virtusa is funding this transaction through a new $25.0 million secured revolving credit facility with JP Morgan Chase Bank, N.A.  Interest under this credit facility accrues at a rate between LIBOR plus 1.5% and LIBOR plus 1.75% based on Virtusa’s ratio of indebtedness to Adjusted EBITDA.   The term of the credit facility is five years, ending December 31, 2018.  The credit facility has certain financial covenants pertaining to Funded Debt to Adjusted EBITDA and Minimum Fixed Charge Coverage Ratios.  This facility replaces Virtusa’s existing $3.0 million line of credit.

Financial Overview of Transaction

Under the terms of the share purchase agreement, Virtusa acquired all the outstanding shares of TradeTech for approximately $20.0 million in cash, as well as up to approximately $4.0 million in earn-out consideration upon TradeTech’s achievement of certain revenue and profit milestones for calendar year 2014.  Virtusa has agreed to issue an aggregate of up to $2.0 million in deferred restricted stock awards from Virtusa’s stock option and incentive plan, not to exceed 65,000 shares, to certain of these new Virtusa employees.  The shares will vest annually over a five year period.

For the fourth quarter of Virtusa’s fiscal year 2014 ending March 31, 2014, Virtusa management currently expects TradeTech to contribute revenue of approximately $4.2 million and to be neutral to Virtusa’s earnings per share on a U.S. GAAP basis inclusive of approximately $800,000 in acquisition related amortization.   On an EBITDA basis, Virtusa currently expects the transaction to be slightly accretive for the fourth quarter of fiscal year 2014.  Virtusa management currently expects the TradeTech acquisition to be slightly accretive to U.S. GAAP earnings per share for fiscal year 2015.