Japanese industrial giant Hitachi Ltd. has signed a $9.5 billion agreement to acquire GlobalLogic Inc., a California-based software engineering firm that develops applications for large enterprises.

The deal, announced today, is expected to close by the end of July.

Tokyo-based Hitachi is a major player in the industrial sector that makes products ranging from auto parts to elevators. It also maintains a sizable presence in the information technology market through its Hitachi Vantara business. The subsidiary sells data storage hardware and hyperconverged infrastructure appliances, as well as software products such as analytics applications.

The acquisition of GlobalLogic is poised to significantly expand Hitachi’s presence in the IT market. GlobalLogic, which is on track to generate revenues of about $1.2 billion this year, helps organizations build new software applications to support their technology initiatives. The company’s client roster includes Qualcomm Inc., Oracle Corp. and other major tech companies, as well as hundreds of other enterprises. 

Alongside the tech industry, GlobalLogic counts the industrial and auto sectors among its main target markets. Hitachi has a major presence in both areas. The deal might create new upselling opportunities for Hitachi by enabling it to promote GlobalLogic offerings to customers of its industrial products and vice versa.

It’s notable that GlobalLogic’s areas of expertise encompass many fast-growing software trends that enterprises are prioritizing as of their IT roadmaps. In the manufacturing sector, the firm helps customers implement digital twins, simulations of industrial equipment that can be used to improve operations. GlobalLogic works on artificial intelligence initiatives as well, among other types of projects. 

On top of coding expertise, the acquisition is set to see Hitachi gain a portfolio of software products. GlobalLogic offers a toolkit that makes it easier to set up cloud-based analytics environments, a set of software building blocks for creating in-vehicle applications and other specialized offerings. Hitachi might seek to expand this part of GlobalLogic’s business following the deal given that software can be a valuable source of high-margin revenue. 

Hitachi emphasized GlobalLogic’s profitability in the acquisition announcement. The software engineering firm is expected to close the current fiscal year with adjusted profit margins north of 20% before interest, taxes and amortization. Hitachi added that GlobalLogic will aim to achieve adjusted earnings of more than $1 billion by fiscal 2028, likewise before interest, taxes and amortization.

The $9.5 billion Hitachi has agreed to pay for the firm includes about $1 billion in debt. Hitachi plans to finance the acquisition with a combination of cash at hand and bank loans.

Photo: Hitachi