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Accenture Wraps Octagon Buyout

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Management technology outsourcing and consulting service provider, Accenture plc (ACN - Analyst Report) recently completed the acquisition of Octagon Research Solutions Inc., a reputed software solutions provider for the life sciences sector. The acquisition, the purchase consideration of which was kept confidential, was announced in August.

Founded in 1999, Octagon provides clinical and regulatory information management solutions to pharmaceutical firms. The company helps the pharma industry market new drugs faster by way of eliminating redundant processes of drug development. The solution helps in prompt clinical data collection as well as submission of results for fast regulatory approval.

Of late, Accenture has seen increasing demand for solutions that could effectively reduce drug development life cycle, time-to-market and costs. Management believes the acquisition to be timely and hopes to meet the surging demand as soon as the new unit is completely integrated into its life sciences industry group.

The drug development lifecycle is a complicated and lengthy process and it might take years to market a drug. The lifecycle involves hundreds of people, drug testing procedures, and above all, high financial risks. Therefore, the longer the process, the higher the financial risks associated with it. Hence, pharma companies often have to rely on outsourcing service providers, such as Octagon, to make the task of marketing a drug faster and easier.

With Octagon, Accenture will increase its presence in the life sciences sector, which will allow the company to secure large deals from its existing customers and acquire new ones. Reportedly, in its last quarter, Accenture’s Product segment delivered high single-digit revenue growth with major contributions from the life sciences industry group.

Apart from this, Accenture announced its intention to acquire Singapore-based distributor management and mobility software company NewsPage Pte Ltd. in late August. The acquisition is expected to strengthen the Accenture CAS software platform, which assists in the sales procedure of companies in the consumer goods industry, particularly with respect to their distributor management.

We are encouraged by Accenture’s strategy to grow through acquisitions. However, increasing competition from IBM Corp. (IBM - Analyst Report), a strained spending environment and Accenture’s broad European exposure (roughly 40.0%) may temper its growth prospects to some extent.

Currently, Accenture has a Zacks #2 Rank (short-term Buy rating), which has been driven by upward revisions to analyst estimates.

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