AI race: Coforge to acquire Encore in nearly $2 billion deal

BENGALURU: Mid-cap IT firm Coforge has announced its plan to acquire AI firm Encora - whose estimated revenue is $600 million for 2026 - giving it a better presence in the hi-tech and healthcare verticals, besides deepening its footprint in North America.

Coforge will acquire the business from Advent, Warburg Pincus and other minority shareholders for an enterprise value of $2.3 billion. The transaction will be funded through a preferential allotment of equity shares representing equity value of approximately $1.9billion. Encora shareholders will hold 20% of the expanded share capital of Coforge after the transaction is completed.

The company will take a bridge loan - or Qualified Institutional Placement - of up to $550 million to clear the loan in Encora.

According to a stock exchange filing, the combined entity will work at an operating margin of 14%. The company has said the hi-tech and healthcare verticals will benefit with several $10 million customers of Encora coming into the Coforge fold. Both verticals will be a $170-million run-rate business.

Encora was founded by Venu Raghavan and former HCLTech executive Anand Birje took over as CEO after private equity Advent International acquired a majority stake from Warburg Pincus. The firm has about 9,000 employees globally.

Calling the Encora acquisition a defining moment for our organization, Coforge CEO Sudhir Singh said its growth will get further accelerated and move to a higher orbit. Before acquisition, only 25% of Coforge's North America Geo unit revenue came from the US West and Mid-West. The acquisition will provide a fillip to Coforge's North America growth plans and its business in that geography is expected to jump by 50% to $1.4 billion after the acquisition.

The IT firm gets access to 3,100 near-shore delivery centres in Latin America through this deal, which should conclude in 4-6 months. This deal brings with it 11 long-term relationships with clients in the $10-million category to boost Coforge's revenues.

This segment has been Coforge's strong point. Coforge joins some other important acquisitions in the AI space that came in earlier this year. This includes HCLTech acquiring Wobby, a start-up setting up agentic AI for data warehouses and TCS' acquisition of ListEngage.