GFT Technologies [ETR:GFT], a Stuttgart-based information technology (IT) services company, is actively looking for acquisitions, CFO Jochen Ruetz told Mergermarket.

“M&A is part of our growth strategy,” Ruetz said. GFT does not acquire companies to create synergies, but rather to expand its business, he added.

GFT seeks to acquire companies that implement software products like those offered by Salesforce [NYSE:CRM], SAP [ETR:SAP] or Guidewire [NYSE:GWRE], the executive said. The ideal acquisition size for these companies is between EUR 15m and EUR 30m in revenues, though smaller targets with at least EUR 10m are also considered, he said.

While potential acquisitions are evaluated in all of the company’s 20 markets, the focus is on the main markets, Brazil, Germany, Spain, Italy, the UK, Canada and the US, Ruetz said.

In the past, GFT used M&A to expand into new geographical regions, but this is currently not a priority, Ruetz says. “For the next three to four years, we want to focus on efficiency and reinforcement in our existing markets.” However, he does not rule out future acquisitions to widen its footprint.

The US is an example of an existing market to be strengthened, Ruetz said, adding that GFT has been operating there since 2008 and it intends to expand its business. “We are looking for companies with significant clients in banking and insurance, ideally with an offshore presence in India or South America,” he said. Suitable targets should have revenues between EUR 30m and EUR 100m, he added.

In addition, GFT plans to grow in India, particularly in the area of IT delivery, Ruetz said. Ideal targets would have 300 to 1,000 employees and revenues between EUR 15m and EUR 40m.

GFT Technologies reported revenues of EUR 646m and an EBITDA of 69.5m, with an adjusted free cash flow of EUR 19.4m, according to its Q3 report. The cautious spending by banks and insurers has resulted in lower-than-expected revenue growth, Ruetz said.

Over the past 12 months, GFT’s stock price has dropped by more than 30%. “Like many competitors, we were valued with high multiples,” Ruetz said.

Acquisitions remain a core element of GFT’s strategy, the executive said. “Since 2011, we have completed a major transaction almost every year,” he added.

With the acquisition of Colombia-based core banking expert Sophos Solutions in 2024 and targens GmbH in 2023, GFT closed two significant and costly deals. “At the moment, our appetite is somewhat smaller. We are currently evaluating targets and hope to close a deal this year in the product implementation segment,” Ruetz added.

GFT ideally finances acquisitions through its operational business. “We also use loans, which we repay via cash flow,” the executive said.

The company has set a debt guideline of below 2x EBITDA, currently equivalent to EUR 180m, and expects this to represent a headroom of EUR 130m going into 2025, Ruetz said.

GFT has worked with LBBW, UniCredit, and Deutsche Bank but is open to further cooperation, Ruetz said. “We have low CAPEX and consistent cash flow, enabling continuous acquisitions,” he added. “We have not conducted a capital increase since 2003, but we do not rule it out in the future.”

The company has a dedicated person for M&A activities, David Mezger, as well as other members of staff who also have other areas of responsibility, Ruetz said. For target searches, it works with investment boutiques and remains open for new partners, he said. For due diligence, GFT prefers to work with regional audit and legal teams, while post-merger integration is handled in-house, he added.

The IT servicing and integration market remains highly fragmented globally and in the DACH region, which could drive future consolidation, Ruetz said.

GFT focuses primarily on digitalising services for banks and insurers, which account for 90% of its business. Deutsche Bank [ETR:DBK] is its largest client, contributing 14% of revenues, followed by Santander [ETR:BSD2], HSBC [ETR:HBC1] and Intesa Sanpaolo [ETR:IES].

Banks and insurers are particularly interested in user experience (UX), cloud migration, standardisation and artificial intelligence (AI), Ruetz said. Other clients come from manufacturing, particularly the automotive industry, and retail, telecoms and fashion, he added.

The company is not planning any acquisitions of specialists in these areas but is open to acquiring IT service providers with larger customer bases in these sectors, Ruetz said.

International competitors include large firms such as Accenture [FRA:CSA] and Capgemini [ETR:CGM]. In the mid-sized offshore segment, competitors include EPAM [FRA:E3M], NTT Data [FRA:NT5], and Globant [FRA:2G2], while Indian competitors include Tata Consulting Services [NSE:TCS].