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Accenture (ACN) Expands RPA Capabilities on Genfour Buyout
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Accenture Plc (ACN - Free Report) is continuing its strategy to grow through acquisitions. Recently, the global IT services provider acquired Genfour, a privately held company in the UK. The company did not disclose terms of the deal.
About Genfour
Headquartered at Cwmbran, in Wales, UK, Genfour was founded in 2012. The company is well known for providing automation services, with a deep domain expertise and industry experience in assessing, implementing and managing automation solutions. Although Genfour serves various clients across multiple industries, it is mostly popular in the insurance, banking and utilities industries.
With this acquisition, Genfour has now become an integral part of the new Accenture Center of Excellence for Intelligent Automation in the UK. Per the agreement, the company’s professionals will join the Accenture Operations global Intelligent Automation team.
Rationale Behind the Acquisition
The latest deal is expected to expand Accenture’s existing intelligent automation services capabilities and strengthen its dominant position in the UK. The buyout is anticipated to enhance Accenture’s ability in applying intelligent automation solutions, thus helping its clients transform and re-engineer their business processes. Per Accenture, “Clients can take advantage of data-driven insights that enable faster, more informed business decisions and better quality of service to their customers.”
Furthermore, the Genfour acquisition is believed to be Accenture’s move toward grabbing the rapidly increasing opportunity for machine learning in IT services. The global consulting giant foresees a sudden rise of robotic process automation (RPA) offerings from outsourcers, software vendors and consultants. Therefore, in our opinion, the acquisition of Genfour will keep Accenture ahead of other automation services providers.
Notably, RPA techniques have gained immense traction over the last couple of years. This is because these techniques bring down cost and time, while providing better quality by reducing human errors. Currently, the technology is being rapidly adopted by the organizations in financial services industry.
According to a report of Grand View Research, the RPA market size is likely to touch the $4 billion mark by 2024 from a meagre $125.2 million in 2015. Hence, we believe that the latest acquisition will help Accenture in grabbing market share in the fast-growing RPA technology space.
Genfour acquisition marks Accenture’s third buyout in the machine learning space. Prior to this, the company had bought New Energy Group – an Italy-based company that specializes in delivering Salesforce’s (CRM - Free Report) product and solutions. It also acquired Altitude, which is best known for its expertise in consumer insight and product creation, through which it helps organizations in innovating and developing physical products and services.
Acquisitions – A Key Growth Strategy
Accenture pursues strategic acquisitions to diversify its offerings and expand in operating markets. So far in 2017, the company has either completed or signed about 10 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, as well as maintain the leading position. A strong cash balance of $3.24 billion at the end of the fiscal second quarter and an operating cash flow of $1.24 billion in the first-half of fiscal 2017 are expected to support Accenture’s inorganic growth strategy.
Bottom Line
Accenture’s long-term prospects look promising due to its consistent focus on 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 jobs, Accenture’s total employee count in the U.S. will increase 30% to 65,000, thereby escalating its salary expenses significantly.
Notably, shares of Accenture have been trading below the Zacks categorized Consulting industry in the year-to-date period. The stock generated a return of 0.5%, lower than the industry’s gain of 2.5%.
The stock currently carries a Zacks Rank #3 (Hold).
Exponent and CRA International have expected long-term earnings per share growth rate of 12% and 8%, respectively.
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Accenture (ACN) Expands RPA Capabilities on Genfour Buyout
Accenture Plc (ACN - Free Report) is continuing its strategy to grow through acquisitions. Recently, the global IT services provider acquired Genfour, a privately held company in the UK. The company did not disclose terms of the deal.
About Genfour
Headquartered at Cwmbran, in Wales, UK, Genfour was founded in 2012. The company is well known for providing automation services, with a deep domain expertise and industry experience in assessing, implementing and managing automation solutions. Although Genfour serves various clients across multiple industries, it is mostly popular in the insurance, banking and utilities industries.
With this acquisition, Genfour has now become an integral part of the new Accenture Center of Excellence for Intelligent Automation in the UK. Per the agreement, the company’s professionals will join the Accenture Operations global Intelligent Automation team.
Rationale Behind the Acquisition
The latest deal is expected to expand Accenture’s existing intelligent automation services capabilities and strengthen its dominant position in the UK. The buyout is anticipated to enhance Accenture’s ability in applying intelligent automation solutions, thus helping its clients transform and re-engineer their business processes. Per Accenture, “Clients can take advantage of data-driven insights that enable faster, more informed business decisions and better quality of service to their customers.”
Furthermore, the Genfour acquisition is believed to be Accenture’s move toward grabbing the rapidly increasing opportunity for machine learning in IT services. The global consulting giant foresees a sudden rise of robotic process automation (RPA) offerings from outsourcers, software vendors and consultants. Therefore, in our opinion, the acquisition of Genfour will keep Accenture ahead of other automation services providers.
Notably, RPA techniques have gained immense traction over the last couple of years. This is because these techniques bring down cost and time, while providing better quality by reducing human errors. Currently, the technology is being rapidly adopted by the organizations in financial services industry.
According to a report of Grand View Research, the RPA market size is likely to touch the $4 billion mark by 2024 from a meagre $125.2 million in 2015. Hence, we believe that the latest acquisition will help Accenture in grabbing market share in the fast-growing RPA technology space.
Genfour acquisition marks Accenture’s third buyout in the machine learning space. Prior to this, the company had bought New Energy Group – an Italy-based company that specializes in delivering Salesforce’s (CRM - Free Report) product and solutions. It also acquired Altitude, which is best known for its expertise in consumer insight and product creation, through which it helps organizations in innovating and developing physical products and services.
Acquisitions – A Key Growth Strategy
Accenture pursues strategic acquisitions to diversify its offerings and expand in operating markets. So far in 2017, the company has either completed or signed about 10 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, as well as maintain the leading position. A strong cash balance of $3.24 billion at the end of the fiscal second quarter and an operating cash flow of $1.24 billion in the first-half of fiscal 2017 are expected to support Accenture’s inorganic growth strategy.
Bottom Line
Accenture’s long-term prospects look promising due to its consistent focus on 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 jobs, Accenture’s total employee count in the U.S. will increase 30% to 65,000, thereby escalating its salary expenses significantly.
Notably, shares of Accenture have been trading below the Zacks categorized Consulting industry in the year-to-date period. The stock generated a return of 0.5%, lower than the industry’s gain of 2.5%.
The stock currently carries a Zacks Rank #3 (Hold).
A couple of better-ranked stocks in the consulting industry are Exponent Inc. (EXPO - Free Report) and CRA International Inc. (CRAI - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Exponent and CRA International have expected long-term earnings per share growth rate of 12% and 8%, respectively.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>