Coforge to acquire AI firm Encora in $2.35 billion deal to boost US, AI-led services play

Coforge, a prominent IT services provider, has announced its agreement to acquire the AI-focused digital engineering company Encora. This deal, valued at $2.35 billion, involves the purchase from Advent International and Warburg Pincus and is set to enhance Coforge's footprint in the AI-led services market. With this acquisition, Coforge anticipates a substantial 50% increase in its North American operations, pushing regional revenues past the $1.4 billion mark. Encora, which has shown impressive growth, is projected to generate $600 million in revenue by fiscal year 2026, a rise from $516 million in FY25, alongside an adjusted EBITDA margin of 19%. Coforge has expressed confidence that the merged entity will create a formidable $2.5 billion technology services powerhouse, capable of delivering enterprise-grade AI solutions across AI engineering, cloud services, and data management. The board has approved the financial structure of the deal, which includes an equity value of $1.89 billion funded through preference shares, allowing Encora shareholders to acquire a 20% stake in Coforge. To finance the remainder, Coforge is considering a bridge loan or a qualified institutional placement (QIP) to address Encora's existing term loan. The company has the green light to raise up to $550 million via QIP or other avenues, with the understanding that QIP may not be necessary if other financing options are secured. The acquisition is expected to significantly benefit Coforge’s HiTech and Healthcare sectors, each aiming for a run-rate of $170 million. Encora's offerings in AI-driven solutions for pharmaceuticals, medtech, and healthtech, along with its established client relationships generating over $10 million annually, will further enhance Coforge's capabilities. Additionally, Encora brings over 3,100 professionals from Latin America, strengthening Coforge's nearshore delivery potential and expanding its reach in the US West and Midwest regions. Following the deal, Coforge forecasts total combined revenue could reach $2 billion by FY27, while maintaining an EBIT margin of 14% after accounting for intangible asset amortization. This strategic acquisition is pending shareholder and regulatory approvals both in India and internationally, with completion anticipated within four to six months.