Accenture Is Preparing to Double-Down on M&A. We Share Our Ideas for Likely Target Areas.

Accenture Is Preparing to Double-Down on M&A. We Share Our Ideas for Likely Target Areas.

Companies mentioned: Accenture (ACN), Alibaba (BABA), AWS (AMZN), Azure (MSFT), Bottomline Technologies (EPAY), Broadridge (BR), DataRobot (Pvt.), GCP (GOOG), IHS Markit (INFO), Oracle (ORCL), Palantir (Pvt.), Qlik (Pvt.), Solera (Pvt.), SS&C (SSNC), Tibco (Pvt.), Verisk (VRSK).
Accenture’s CEO of North America, Julie Sweet, will become CEO of Accenture effective September 1st 2019. Ms. Sweet is an M&A lawyer by trade having worked for Cravath, Swaine & Moore LLP as a partner for 10 years until she joined Accenture as General Counsel in 2010. Sweet was named CEO of Accenture North America in 2015. We expect that M&A will take on a more prominent role in Accenture’s growth strategy under Ms. Sweet’s leadership. We have shared our thoughts below as to where Accenture is likely to focus its M&A effort. But first…  

…let’s consider Accenture’s recent M&A track record:

  • Fiscal 2019: Accenture expects to allocate approximately $1.3 billion to M&A this year which translates to a revenue contribution of approximately 2%.
  • Fiscal 2018: During fiscal 2018 Accenture completed a number of individually immaterial acquisitions for total consideration of $596 million net of cash acquired.
  • Fiscal 2017: During fiscal 2017 Accenture completed a number of individually immaterial acquisitions for total consideration of $1.64 billion net of cash acquired

Focus on Larger Acquisitions

Accenture is likely to focus on larger M&A opportunities under Ms. Sweet. Small deals take just as long to close as large deals (if not longer), and Accenture has the dry powder to take larger bites at the M&A pie. The firm enjoys a $132 billion market cap and generated more than $6 billion of Operating Cash Flow in fiscal 2018. One could certainly imagine cash and stock deals in the single and double-digit billion valuation range. 

Broadly-Defined “Cloud Services” – The Focus Area

We expect that Accenture’s M&A activity will focus on Business/IT Services companies that play in broadly-defined “cloud services” including remote servers, embedded AI/Machine Learning/ Deep Learning, edge computing, augmented reality and more. Therefore, services companies that partner with AWS, Microsoft Azure, Oracle cloud, GCP and Alibaba cloud are fair game. 

“Advanced Analytics” – A Prospective Target Area

Advanced analytics companies that sell into Insurance, CPG, Healthcare, Energy and Financial Services would also make sense. These could include Palantir Technologies as well as smaller, VC-backed organizations that have ramped to 500-1,000+ people but have hit a data scientist recruiting wall. Companies that have established a foothold in Latin America ought to be of interest.

Companies such as Tibco, Qlik Technologies and DataRobot also have interesting technology that may appeal to Accenture whether it be ML-based predictive analytics (DataRobot), or data integration/processing and analytics/visualization (Tibco/Spotfire and Qlik).  

“Info Services” – Healthy Operating Margins, Data and Cash Flow

Information Services companies such as IHS Markit (INFO), Solera and Verisk (VRSK) could also find themselves in Accenture’s sights.

“FinTech” – Where It’s At

FinTech companies that provide outsourced services to the Financial Services industry such as SS&C (SSNC) and Broadridge (BR), could find themselves in Accenture’s M&A crosshairs to feed the Outsourcing side of the business. We expect for Financial Services firms to continue to face disruption which doesn’t bode well for Accenture’s bookings activity in the Financial Services sector. Bottomline Technologies (EPAY) could also make sense for Accenture in terms of delivering cash management services to large banks. Blockchain is certainly an area of focus, particularly as the space evolves and matures. I’m thinking of the Blockchain networks (infrastructure), not the various digital currencies. Northern Trust will transfer its private equity Blockchain to Broadridge.  

“CyberSecurity” – Early Days

Last, we could potentially see Accenture moving into the crowded CyberSecurity space where there is plenty of opportunity across both public and private companies (the private sector is crowded as VCs have written numerous checks).



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