Consulting and technology giants Accenture have announced plans to spend a huge $1.8 billion on acquisitions to strengthen its global outfit – significantly more than what its biggest rivals have spent in the past years combined.
Aided by the planned acquisitions of companies such as analytics and cloud computing firms, Accenture, which for instance does as much business as Indian players Tata Consultancy Services (TCS), Infosys and Wipro put together, has seen strong growth since it went public in 2001. Other major rivals of the firm include the Big Four in the consulting space, and media agencies in the creative landscape.
A strong inorganic push has been instrumental in Accenture's growth – the global consultancy spent more than $900 million in each of the past two years on buying companies, driven by an upsurge in demand from Fortune 1000 clients for digital and IT solutions.
Accenture is renowned for being able to blend its expertise in new technologies, such as data analytics and cloud computing, with a strong consulting and creative practice, helping clients utilise innovations which help them run their businesses better.
Acquisitions confirmed in recent months alone include that of digital product developers Intrepid, agile software consultancy Solutions IQ, e-commerce experts Media Hive and cyber-security advisors iDefense Security.
These acquisitions have also helped Accenture future-proof its own operations, with the firm reporting its third quarter earnings coming 50% from its latest offerings in automation, cloud computing and security-related solutions. While Accenture look likely to make good on their $1.8 billion spending target in M&A meanwhile, competitors TCS, Infosys and Wipro have collectively only spent $1.58 billion on acquisitions since April 2014. Even including a further $80 million spent by Infosys and Wipro through their corporate venture arms, their levels of investment pale in comparison.
Accenture is expected to end FY17 with at-best 5.8% dollar revenue growth. For the year to August 2016, the firm's management said its acquisitions accounted for 2% of overall 10.5% constant currency growth (adjusted for a 6% dollar revenue growth). However, key to the process, is that none of Accenture’s 40 acquisitions over the past three years have been large. Rather than targeting large competitors for a short-term boom, they have aimed for smaller companies to enable them to diversify, while gaining new innovative techniques from new firms who might otherwise have become competitors. Over three quarters of the firms acquired had less than 200 staff.
“Accenture has done a tremendous job with financial engineering and M&As,” said Ray Wang, founder of Constellation Research, a technology research and advisory firm. “They have bought their way into offensive growth, entered new markets such as AI, marketing operations, and digital transformation with design firms faster than others.”
Speaking after the recent acquisition of cloud-based salesforce experts Phase One Consulting, David Moskovitz, Chief Executive of Accenture Federal Services, said, “New cloud and Software-as-a-Service platforms are transforming both the federal technology landscape and the way agencies serve their customers and achieve their missions. Through investments like our acquisition of Phase One, we are expanding our capabilities, technology and skills to help lead our federal clients on their journey to be more agile, responsive and secure in a digital world.”