The rate at which Indian IT service providers are acquiring western technology companies is accelerating rapidly, according to a new report published today.

The study from independent corporate finance house Close Brothers found that of 101 international companies acquired by Indian firms since 2002 almost a quarter were in the technology sector.

The UK was the second biggest target after the US, accounting for 17 acquisitions, including Satyam's acquisition last year of Citisoft and Tata Technologies' purchase of design software specialist Incat.

The report says the trend is accelerating – the number of international acquisitions in the first four months of 2006 was just short of the 42 deals completed in the whole of 2005.

A spokesman for Close Brothers said that Indian firms have large cash reserves so more deals are likely as they attempt to establish themselves as global service providers. He added that most customers welcome the trend because acquisitions often add a familiar and local presence to the service providers’ technical capabilities in India.