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Accenture Strengthens Utilities Consulting with Davies Buyout
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Continuing with its strategy of growing through acquisitions, Accenture Plc (ACN - Free Report) recently announced that it has acquired Davies Consulting. However, the financial terms of the deal have not been disclosed.
Founded in 1991, the Chevy Chase, MD-based consultancy firm provided utility asset management, risk management, grid and pipeline network modernization and emergency management services. Since its formation, Davies Consulting has served various private and public utility clients, which include over 50 Fortune 500 companies. The company currently has more than 50 professionals.
With this acquisition, Davies Consulting’s business has now become a part of Accenture’s utilities industry practice, which offers consulting and end-to-end digital asset management services. The employees of Davies Consulting are absorbed under the Digital Asset Management group in Accenture’s transmission and distribution practice.
The stock gained 1.3% during yesterday’s trade. Notably, shares of Accenture have been trading higher than the Zacks categorized Consulting industry in the year-to-date period. The stock returned 6% while the industry gained 3.9%.
Rationale Behind Acquisition
The acquisition is Accenture’s second buyout in the utilities sector. Prior to this, the company had acquired Structure, a leader in grid operations, in Jan 2015.
By integrating Davies Consulting, Accenture has not only got a large talent pool but also gained a huge customer base. Therefore, we believe that this acquisition will strengthen Accenture’s presence in the Utilities consulting market and also help it to gain more market share.
By combining Davies Consulting’s business, Accenture thinks that it can provide more integrated approach to digital asset management solutions.
Tony Masella, managing director of Accenture’s North America utilities practice said that “Joining with Davies Consulting will further strengthen our ability to help utility clients manage energy delivery by integrating technology analytics and processes. Together, we will provide a full suite of asset management solutions to serve the rapidly evolving needs of the industry.”
Therefore, we believe that the buyout will enhance Accenture’s capabilities in providing end-to-end consulting services to the utility companies. It will also help it to gain more market share, thereby boosting its top-line performance.
Acquisitions – A Key Growth Strategy
Accenture pursues strategic acquisitions to diversify its offerings and expand operating markets. So far in 2017, the company has either completed or signed about 7 acquisition deals across various business segments. Last year too, Accenture completed or signed about 12 acquisition deals across various business segments, including IT security, CRM capabilities and strategy consulting. In 2015, it had closed 21 takeovers.
These acquisitions have enabled Accenture to foray into newer markets, diversify and broaden its product portfolio, and maintain its leading position. A strong cash balance of $4.08 billion and an operating cash flow of $1.08 billion at the end of first-quarter fiscal 2017 are expected to support Accenture’s inorganic growth strategy.
Bottom Line
Accenture’s long-term prospects look promising due to its sustained focus on new and innovative product launches, continuous investments in enhancing digital and marketing capabilities, as well as major acquisitions. Moreover, we believe that regular acquisitions will significantly contribute to the company's revenue stream.
Nonetheless, Accenture’s recent announcement of creating 15K new jobs by 2020 and investment plan of $1.4 billion for employee training and opening of 10 innovation centers across the U.S. cities may dent its bottom-line results in our opinion. The company is believed to be preparing itself for a more protectionist U.S. technology visa program under the newly elected president, Donald Trump.
It should be noted that out of over 394,000 of its total workforce, 140,000 are in India, which provides it a cost advantage. With the addition of 15,000 new jobs, Accenture’s total employee count in the U.S. will increase by 30% to 65,000, thereby increasing its salary expenses significantly.
The stock currently carries a Zacks Rank #4 (Sell).
Exponent has witnessed upward estimate revisions for 2017 and 2018 in the last 30 days and has surpassed the Zacks Consensus Estimate thrice in the trailing four quarters with an average positive surprise of 9.35%.
Estimates for CRA International have also moved up in the last 30 days. It has surpassed the Zacks Consensus Estimate thrice in the trailing four quarters.
Estimates for The Hackett Group have also moved up in the last 7 days.
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Accenture Strengthens Utilities Consulting with Davies Buyout
Continuing with its strategy of growing through acquisitions, Accenture Plc (ACN - Free Report) recently announced that it has acquired Davies Consulting. However, the financial terms of the deal have not been disclosed.
Founded in 1991, the Chevy Chase, MD-based consultancy firm provided utility asset management, risk management, grid and pipeline network modernization and emergency management services. Since its formation, Davies Consulting has served various private and public utility clients, which include over 50 Fortune 500 companies. The company currently has more than 50 professionals.
With this acquisition, Davies Consulting’s business has now become a part of Accenture’s utilities industry practice, which offers consulting and end-to-end digital asset management services. The employees of Davies Consulting are absorbed under the Digital Asset Management group in Accenture’s transmission and distribution practice.
The stock gained 1.3% during yesterday’s trade. Notably, shares of Accenture have been trading higher than the Zacks categorized Consulting industry in the year-to-date period. The stock returned 6% while the industry gained 3.9%.
Rationale Behind Acquisition
The acquisition is Accenture’s second buyout in the utilities sector. Prior to this, the company had acquired Structure, a leader in grid operations, in Jan 2015.
By integrating Davies Consulting, Accenture has not only got a large talent pool but also gained a huge customer base. Therefore, we believe that this acquisition will strengthen Accenture’s presence in the Utilities consulting market and also help it to gain more market share.
By combining Davies Consulting’s business, Accenture thinks that it can provide more integrated approach to digital asset management solutions.
Tony Masella, managing director of Accenture’s North America utilities practice said that “Joining with Davies Consulting will further strengthen our ability to help utility clients manage energy delivery by integrating technology analytics and processes. Together, we will provide a full suite of asset management solutions to serve the rapidly evolving needs of the industry.”
Therefore, we believe that the buyout will enhance Accenture’s capabilities in providing end-to-end consulting services to the utility companies. It will also help it to gain more market share, thereby boosting its top-line performance.
Acquisitions – A Key Growth Strategy
Accenture pursues strategic acquisitions to diversify its offerings and expand operating markets. So far in 2017, the company has either completed or signed about 7 acquisition deals across various business segments. Last year too, Accenture completed or signed about 12 acquisition deals across various business segments, including IT security, CRM capabilities and strategy consulting. In 2015, it had closed 21 takeovers.
These acquisitions have enabled Accenture to foray into newer markets, diversify and broaden its product portfolio, and maintain its leading position. A strong cash balance of $4.08 billion and an operating cash flow of $1.08 billion at the end of first-quarter fiscal 2017 are expected to support Accenture’s inorganic growth strategy.
Bottom Line
Accenture’s long-term prospects look promising due to its sustained focus on new and innovative product launches, continuous investments in enhancing digital and marketing capabilities, as well as major acquisitions. Moreover, we believe that regular acquisitions will significantly contribute to the company's revenue stream.
Nonetheless, Accenture’s recent announcement of creating 15K new jobs by 2020 and investment plan of $1.4 billion for employee training and opening of 10 innovation centers across the U.S. cities may dent its bottom-line results in our opinion. The company is believed to be preparing itself for a more protectionist U.S. technology visa program under the newly elected president, Donald Trump.
It should be noted that out of over 394,000 of its total workforce, 140,000 are in India, which provides it a cost advantage. With the addition of 15,000 new jobs, Accenture’s total employee count in the U.S. will increase by 30% to 65,000, thereby increasing its salary expenses significantly.
The stock currently carries a Zacks Rank #4 (Sell).
Better-ranked stocks in the consulting industry are Exponent Inc. (EXPO - Free Report) , CRA International Inc. (CRAI - Free Report) and The Hackett Group, Inc. (HCKT - Free Report) . Exponent sports a Zacks Rank #1 (Strong Buy) while CRA International and The Hackett Group carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Exponent has witnessed upward estimate revisions for 2017 and 2018 in the last 30 days and has surpassed the Zacks Consensus Estimate thrice in the trailing four quarters with an average positive surprise of 9.35%.
Estimates for CRA International have also moved up in the last 30 days. It has surpassed the Zacks Consensus Estimate thrice in the trailing four quarters.
Estimates for The Hackett Group have also moved up in the last 7 days.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>