Coforge to Acquire Encora for $2.35 Billion in All-Stock Deal

Coforge Announces Major Expansion with Encora Acquisition

Indian IT services provider Coforge Ltd. has announced a definitive agreement to acquire Encora, a U.S.-based technology services company specializing in artificial intelligence. The transaction, valued at an enterprise level of $1.35 billion, is structured as an all-stock deal, marking a significant move by Coforge to strengthen its position in the high-growth AI-led services market. The acquisition will see Coforge integrate Encora's AI-native capabilities to create a combined entity projected to achieve $1 billion in revenue by the fiscal year 2027.

Transaction Structure and Financials

The deal involves Coforge paying an equity value of $1.89 billion through a preferential allotment of its shares to Encora's stakeholders. This arrangement will result in Encora's shareholders, primarily private equity firms Advent International and Warburg Pincus, acquiring an approximate 20% stake in the expanded Coforge entity. The sellers will roll over their investment into Coforge, indicating confidence in the combined company's future growth prospects.

To manage Encora's existing debt, Coforge plans to raise up to $150 million. This will be financed through a bridge loan or a Qualified Institutional Placement (QIP), which will be used to retire a term loan on Encora's books. The board of Coforge has formally approved the issuance of 9.38 crore equity shares at a price of ₹1,815.91 per share to facilitate the transaction.

Strategic Rationale: A Push into AI and Cloud

The acquisition is strategically aimed at enhancing Coforge's capabilities in AI, cloud, and data services. Encora brings its AI-native platform, AIVA, which focuses on composable agentic AI, intelligent process design, and agent-native engineering. With deep partnerships with major cloud providers like AWS, Microsoft, and Google, Encora is well-positioned to help clients navigate digital transformation. This move significantly boosts Coforge's service offerings, particularly in the digital engineering and product development space.

Furthermore, Encora's strong presence in Latin America, with over 3,100 subject matter experts serving U.S. clients, provides Coforge with a substantial nearshore delivery capability. This geographical expansion is expected to improve service delivery and client engagement in the crucial North American market.

Projected Growth and Market Impact

The combined entity is set to become a formidable player in the IT services landscape. Coforge projects that the acquisition will help generate $1 billion in revenue from AI-led engineering, data, and cloud services alone by FY27. The deal is also expected to immediately scale Coforge's Hi-Tech and Healthcare verticals, turning them into businesses with a run-rate of over $170 million each. The acquisition expands Coforge's client footprint in the West and Mid-West regions of the United States, adding to its portfolio of high-value relationships.

Regulatory Approvals and Timeline

The completion of the transaction is subject to customary closing conditions, including shareholder and regulatory approvals. Coforge expects to secure shareholder approval within 30 days of signing the definitive agreement. However, the deal requires clearance from multiple regulatory bodies. Key approvals include those from the Reserve Bank of India (RBI) for financial commitments exceeding $1 billion, Hart-Scott-Rodino Act clearance in the U.S. for antitrust, and similar approvals in Australia. Foreign Direct Investment (FDI) approvals are also needed in Romania and Spain. The entire process is anticipated to take between four to six months.

Conclusion

Coforge's acquisition of Encora is a transformative step that significantly elevates its scale and capabilities in the digital engineering and AI services domain. By integrating Encora's specialized expertise and nearshore delivery network, Coforge is positioning itself to capture a larger share of the rapidly growing market for AI-driven technology solutions. The all-stock nature of the deal underscores a long-term strategic vision shared by both companies and their investors, setting the stage for a new phase of growth.