ANZ-CTS Rs 175-crore deal scuttled over poaching, pricing concerns

It is learnt from a source privy to the developments leading to the deal-break that ANZ had poached human resources from the CTS camp during the deal-closing stage causing a collapse in negotiations.  

ANZ was keen on deploying the outsourcing model through an ‘affordable vendor’ to save precious dollars, especially on the back of mounting cost pressures and wafer-thin margins dictating the course of business. 

The $26 mn dollar ‘deal in the making’ went kaput a few weeks ago, when the banking MNC cited the expensive nature of the contract and put a spanner in the works, the source said. 

However, it is reliably learnt that during the ongoing stage of negotiations, ANZ had poached human resources engaged in the F&A vertical of CTS. This hiring of key operational resources was made possible even while the backdoor discussions were on, given the physical proximity of the facilities of the two entities in Manyata Tech Park in Bengaluru. 

The CTS technology head, who directly reports to Francisco D’Souza, CEO of the Nasdaq-listed firm found out this action of ANZ 

highly “inappropriate.” That is when the decision was taken to abandon the deal that was coming to a close after the long-drawn period of negotiation. 

Attempts to resolve the issue through calls between senior members of the leadership team in the US and India of the two companies could not salvage the big-ticket deal, it is learnt. 

The F&A vertical contributes close to 40 per cent of the overall revenues for CTS, which reported its Q4 results last week. The F&A business of $1,461 mn, had shown a 6 per cent YoY growth. 

The company’s Q4 revenues stood at $3.91bn. In its revenue segmentation, CTS had shown increased business from insurance companies and mid-tier banks. In the history of ANZ, such an approach has never been adopted and this deed only leaves a bad taste as far as the broken deal is concerned, the source said. 

ANZ, on its part, has been on a massive restructuring drive across the board, which includes internally downsizing roles in India too. With roles being bid up to two levels below a senior position, the case is strong for outsourcing to cut costs.  

On the surface, it appears as if the $15 bn IT behemoth CTS has suffered a setback in the acquisition of a customer, but it is a loss of a different nature for the MNC bank, whose credibility has been dented, the source said. 

When contacted, the CTS spokesperson said the company chose not to comment on the issue. ANZ did not respond to the queries at the time of going to print.