The acquisition is a major step in President and CEO Penakalapati’s goal of reaching $100 million in revenue by 2020. Penakalapati predicts combined sales for the two firms of $50 million this year.
The deal has taken roughly four months to come together, and it is expected to close in late October.
The acquisition is slated to bring the two firms’ total employment to over 700 staffers spanning all 50 states and in India. The two companies employ some 150 people in New York. The deal also includes the addition of 50 people in Avani’s India office.
The addition of Indotronix will give Penakalapati’s pair of firms government clients and prime contractors who have been customers for 30 years, a huge benefit for a company with eight years of operating history, Penakalapati said
Indotronix clients include Lockheed Martin Corp., Verizon Wireless Inc. and Deloitte LLP.
“I think the biggest advantage that we have with the firm is the history and the clientele they have today,” Penakalapati said. “That’s hard for any business like us; really starting off it’s tough to win (top clients). With this firm we have now a foot in the door with those big class customers.”
“This makes perfect sense to me. It’s a close-knit family. It’s run by one person who we can trust; it’s an easy transaction,” he added.
The software development firm, which has its headquarters at 687 Lee Road, already had planned to add five local staffers by the close of 2016. Next year Avani plans to add another 10 people to Rochester’s workforce and reach $65 million to $70 million in revenues.
“I think (the acquisition) is a great fit,” said Mitch Meller, vice president of IT services for Avani. “I think there’s a lot of synergy between our two companies. We focus a lot on applications; they do that as well as some infrastructure, and I think our philosophies in general are very similar.”
Indotronix was founded by Babu Rao Mandava in 1986. He worked for IBM Corp. for 20 years before taking early retirement in 1985.
At its peak, Indotronix grew to an $80 million firm around 2006-07, which included multiple other business lines of the Mandava family that spanned the food production, security and real estate industries. Mandava passed away in December, prompting his family to reconsider the company’s future.
There was no plan to sell the business until its leaders came into contact with Penakalapati, said Aneel Potluri, grandson of Mandava and president and chief operating officer of Indotronix.
“I know in the normal sense when people are looking to sell they go through a very structured sale process with a broker and things like that, and this was very unique because there was no broker,” he said. “It was just an arrangement between two people, and my comfort with him is what really got the deal going forward because he reminds me so much of my own grandfather.”
Potluri and his cousin Ashok Mandava have led Indotronix in recent years. Mandava serves as executive vice president and chairman of the firm’s India branch.
Potluri will transition from president to an adviser role for the combined company when the deal closes. Mandava will shift his focus to the family’s other companies that used to be housed under the Indotronix name. Surrendering the Indotronix name is part of the deal with Avani.
“We’re looking forward to it. We’re very happy that our firm is going to be part of the Avani family,” Potluri said. “There will be a firm in Rochester now that will have dozens upon dozens of Fortune 500 clients.
“Avani already had some too, but the combination of both will be a very world class organization (and) (Penakalapati’s) ability to service that caliber of clientele will be very well-cemented with this merger,” Potluri said.
The deal calls for the two firms to be under the holding company of Indotronix Avani Inc. The headquarters of the combined companies will be in Rochester, although a few employees will remain in the Poughkeepsie office. Penakalapati will run the companies as two separate entities, he said.
“It’s going to add more jobs here,” Penakalapati said. “This is our corporate headquarters. This is where we run, we make money and spend money here; it’s good for Rochester. I’m very confident that we can bring a lot more jobs to Rochester.”
Indotronix is given new life under Penkalapati’s vision.
“The reason why I was so confident (with the acquisition)—it’s the people that you’re dealing with—you get this comfort,” he said. “I think that from the day talking to Aneel and some of his family shareholders I always had a comfort. His grandfather worked very hard to build the company. Your business builds a reputation based on the clients that you have. Now we have these clients (and the) new technology skills—I think it’s a perfect combination for us.”
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