Could you share how the deal came about? Did Nagarro approach Persistent, or the other way around?

It’s been known in the market for some time that we were looking to take Nagarro private. (The company is listed in Germany.) The AI revolution requires access to capital and resources that may not be readily available in the current listed context. With that background, Persistent reached out to us and we have been in discussions for several months.

Were you in talks with multiple potential partners or was Persistent the only one on the horizon?

We have the responsibility to look at various options, but we have known Persistent for a long time. It is older than us and historically has been a few years ahead of us as a product-engineering company. However, Nagarro flipped from product engineering into digital transformation. AI transformation is going to be exactly that – enterprise doing digital engineering for enterprises. So you want a partner with the same DNA as you, and we felt Persistent also had that engineering-led culture. Also, the synergy between the two businesses is incredible.

Some analysts have flagged concerns over Persistent offering 140 per cent premium over the listed share price. Has the digital engineering aspect helped you to get that premium?

We don’t feel it’s a premium. We feel that the client list that we have is incredible. Despite the software meltdown, the company’s fundamentals remain strong. It prepared itself for the digital transformation revolution. In 2022, we were the fastest-growing company of any significant size in the world. Now, we’re preparing ourselves very hard for the AI transformation. We hardly lose a couple of our top 200 clients in a year.

You built this company very differently. Is there a concern that the marriage of two different working styles could become an issue?

Both sides are very conscious of culture. Both have an engineering-first culture. It’s our hypothesis that there will come this AI wave, a squeeze out, and to be able to be one of the players that can take advantage of the squeeze out, you have to be a certain size and a certain footprint. Not just a niche player, you have to be a player of some heft because at some point. As in the Y2K era, people tend to gravitate towards the safe bets. So, you need to have some scale. No one is going to give core, complex challenging work to an unknown party. The AI wave is more of a cross-industry wave. It has a lot of commonality. You don’t want to be replicating the same motions and investments in different business units. So, regardless of Persistent, we have already started to simplify our organisation design.  We have to find a shared direction where we are going to take the company.

There is also an issue of the business model shifting. We have AI companies getting into IT services, and clients are looking to deploy AI agents instead of outsourcing. How will this merger with a traditional IT services company help you leverage future potential?

These frontier model companies building services companies is actually a clear endorsement that services companies will be more than relevant. It’s also an endorsement that there is revenue and profit in that business. It will be very challenging for someone to just come in and replace that. Nagarro has easily fended off attacks or competitive moves from partners walking in one of the frontier model companies and trying to hit our largest accounts. I believe that if you look at the IT spending stack, digital engineering is just 10-15 per cent. I see the IT sector will diverge. Productivity improvements from AI will hit both run and build, but while run will not be able to compensate, there can be more work in build. We can design ourselves around this. If the deal happens, we are going to be able to reinvent ourselves as a company, together.

How would the structuring of the new merged entity look?

The deal still has to go through many hurdles. It will take a few quarters before the deal is wrapped up. The most important thing that we want to do is to bring more services to our clients. We will soon have new capabilities, new access and that’s the first priority and after that we will see as things go by.

Would you stay on at the helm for some time post the deal? What’s next for you?

For me, it’s a key priority for this deal to be successful. I’m not saying I will continue as CEO. What is really important is that the outcome is delivered. So, I remain associated. The buyer gets the chance to decide at some point but from my perspective, I’m available to make this a success.

While this plays out, are you already thinking about next big idea?

No. We at Nagarro continue to see enormous opportunity in the AI space, being a trusted advisor on AI transformation. I think the word trusted advisor has never been as important as with AI given the risks on the engineering level, security level, governance level, investment level. It’s a fantastic intellectual exercise to design the firm’s offering and one of the reasons why Persistent is so interesting is they have created this sales growth engine so we don’t have to divert our attention to also learning that new capability. We can now focus on one thing and let much more experienced hands do the other thing, that’s at least the mental model.