Persistent Systems made a bold move Friday, announcing its acquisition of Munich-based Nagarro for €1.27bn in a deal that reshapes India's IT services landscape. The Pune-based company will pay a 140% premium on Nagarro's closing share price, valuing the transaction at roughly €81 per share.

The acquisition sent Persistent Systems shares tumbling 10% Monday as investors questioned the steep pricing and debt financing through a €1.4bn Barclays bridge facility. CEO Sandeep Kalra defended the timing, arguing sector weakness created the opportunity to buy assets at attractive valuations.

Strategically, the deal addresses Persistent's geographic imbalance. Currently drawing 80% of revenue from the US with minimal European presence, the combined entity would generate 62% US and 22% European revenue. Nagarro brings SAP enterprise platform capabilities and delivery centers across eastern Europe, the Middle East, Turkey, Japan, and the Philippines.

Kalra projects 5-6% earnings per share accretion in year one after excluding integration costs. The acquisition positions Persistent among India's top 10 IT services firms with nearly $3bn combined revenue, targeting large multi-geography contracts that Fortune 500 clients increasingly demand.