Mahindra & Mahindra (M&M) is close to a deal to buy a German auto component engineering services firm for $5 million. Sources say the term sheet has been signed.

The purchase would give M&M access to the European market. This is the first step towards implementing the company's new auto ancillary plans. The 50-strong target firm has Volvo, Audi and some German carmakers as clients.

M&M wants the German firm to be the front end, for its low-cost Indian back end. In September, M&M set up the Mahindra Systems & Automotive Technology division to spearhead its components strategy.

Most of the staff from the auto division's R&D, those who developed the Scorpio, have been moved to MSAT. M&M is now looking US acquisitions.

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