Information technology giant Accenture has taken the acquisition route to spur growth. In the last five years, the company had spent around $3.5 billion to make over 70 buyouts. To put that in perspective, the total amount spent on acquisitions by Accenture is more than the two IT biggies, Infosys and Wipro Ltd put together, had spent on acquisitions. The acquisitions done by Accenture are by no means a small feat as it requires a well-oiled M&A system to drive so many acquisitions and ensure smooth integration to deliver value.
How buyouts spur growth
Ireland-based Accenture’s spate of acquisitions of companies such as analytics and cloud computing has helped to outpace growth. The listed company, which follows a September-August fiscal, is likely to report 6.7% dollar revenue growth in the year to August 2018. The aggressive acquisition model of Accenture is driven by Fortune 1000 clients demanding from the IT vendors solutions that help them run their business better. In fact, in the digital space newer technologies such as data analytics and cloud computing, where Accenture has done acquisitions, are the growth drivers of the future.
Accenture’s cloud computing and security-related solutions accounted for over 50% of revenue. The company has done a good job with financial engineering and mergers and acquisitions as they have bought their way into aggressive growth and expanded into new businesses like artificial intelligence, marketing operations and digital transformation. The size of acquisitions matters and Accenture has set the right tone. Most of the acquisitions are smaller in size with less than 200 staff. Globally, Accenture is known for its expertise in new technologies such as data analytics, cloud computing, consulting and creative practices. These help clients utilize the innovations for business growth.
Over the years, Accenture has become a global company not just through organic growth but through strategically acquiring smaller assets globally for greater depth in their customer relations and be one-stop shop for all professional services. Most notably, Accenture does not believe in large acquisitions because of high failure rates. The company does acquisitions of very specific companies with very specific and differentiated capabilities.
Snapshot of few acquisitions
Accenture had acquired Genfour, an automation integration and professional service company. In fact, Genfour has been growing its revenues more than double year-on-year. The company has a strong presence in the insurance and utilities sectors as well as a few clients located in the US. The company works with many service delivery companies such as Blue Prism, UniPath and Celaton. Since automation skills are in short supply, the acquisition of Genfour by Accenture helped in garnering skills to grow. In terms of technology, the two companies’ capabilities complement each other and over the years, Accenture has built extensive automation capabilities.
Last year, Accenture bought Austin-based Clearhead, a digital optimization outfit that specializes in helping bands personalize their interactions with customers. The 70-strong headcount, with a client base such as Adidas, Tesco is helping Accenture’s digital growth. Clearhead’s business model helps clients in brick and mortar retail improve the e-commerce experience. In the similar business space, Accenture had acquired Kamarama, a creative agency, in 2016. In a quick move, it also acquired Australia based independent creative shop The Monkeys.
The other acquisitions include that of digital product developers Intrepid, agile software consultancy solutions IQ, e-commerce experts Media Hive and cyber security advisors iDefence Security. All these acquisitions have helped Accenture future-proof its own operations. Other acquisitions are OCTO Technology, a digital consulting firm based in Paris and Allen International, a design consultancy that specializes in banking. In cloud, it has acquired DayNine, a workday consulting and services provider and Nascho Consulting.
Accenture has been betting big on acquisitions in the digital agencies. It has made around five acquisitions in the last five years in this space. These were done to gain entry into a geography or clients unique to those agencies. The acquisitions opened up the door for business in Germany, Netherlands, Hongkong and Brazil. Moreover, Accenture has been progressively focusing on Software as a Service (SaaS) consulting and acquisitions like Servicenow Consulting, Nascho, Workday and Salesforce Consulting has given the company enough skill base to expand. Moreover, Accenture has been aggressive to enter marketing services as they seek to challenge the role of agencies by offering solutions that cover every aspect of customer experience.
An analysis of all the 70 acquisitions done by Accenture shows that around 50 of them are in the areas of design, social, mobile, analytics, cloud computing, cyber security and Internet of Things that will be the new revenue stream of the future. Going forward, the market is moving towards increasing levels of domain and industry specific automation. So, Accenture will build capabilities for specific domains and vertical expertise as well as increasingly more complex projects. Accenture is helping customers to transform from legacy processes to digital initiative and these acquisitions are helping the company. The path laid by Accenture is an envious one for others in the industry to emulate.
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