Continuing with its strategy of growing through acquisitions, Accenture Plc (ACN - Analyst Report) recently announced that it has entered into an agreement to acquire Kurt Salmon – a strategy consulting firm – that mainly focuses on the retail industry. However, the financial terms of the deal have not been disclosed.
About Kurt Salmon
Founded in 1935, Kurt Salmon specializes in providing operational strategy consulting, which includes merchandising, logistic and supply chain operations, product development, omni-channel retail strategy, corporate strategy and due diligence. The company has a total employee strength of over 260 which serves at its offices in the U.S., Germany, UK, Japan and China.
Accenture intends to integrate Kurt Salmon’s business into its Accenture Strategy division and expects the target company’s employees to join the integrating division upon successful completion of the acquisition.
Accenture Enhancing Retail Consulting Capabilities
By integrating Kurt Salmon, Accenture will not only get a large talent pool but will also gain a huge customer base. Therefore, we believe that this acquisition will strengthen Accenture’s presence in the retail consulting market, as well as help in gaining more market share.
Per the company, the buyout is likely to expand its capabilities in providing “end-to-end strategy consulting services to top retailers and private equity firms in a world disrupted by digital”.
Mark Knickrehm, chief executive officer of Accenture Strategy said that “With digital disruption forcing retailers to rethink their entire business and operating models, we expect continued strong demand for strategy consulting services in this industry,”. He further added that “This acquisition will enhance our ability to deliver the industry-specific strategies that our clients are increasingly seeking, in order to drive competitiveness and operational excellence at the intersection of business and technology.”
We have noticed that Accenture has been trying to expand its retail consulting business through acquisitions. Most recently, the company acquired a German-based consultancy company – dgroup, which delivers end-to-end management consulting services to help companies achieve digital transformation across the nation.
Furthermore, last year, it acquired Axia Limited, which specializes in providing strategic consulting services and implementation support to help clients manage costs, and thereby gain a competitive advantage. Its consulting services were used to address a number of areas including growth, operational excellence, go-to-market models, performance management and M&A strategies. Most importantly, the company had a diverse client base, ranging from life sciences and healthcare to consumer goods sectors.
Considering the growing need for strategy consulting, we expect that Accenture’s investments in consulting capabilities will boost long-term growth. This will also enable the company to effectively compete with other consulting service providers such as CBIZ Inc. (CBZ - Snapshot Report) , CoreLogic, Inc. (CLGX - Snapshot Report) and Navigant Consulting Inc. (NCI - Analyst Report) .
Accenture’s long-term prospect looks promising due to sustained focus on new and innovative product launches, continuous investments in enhancing digital and marketing capabilities as well as major acquisitions. However, we are cautious about its near-term performance given the strained IT spending scenario. As per a research report of Gartner, the worldwide IT spending to remain flat year over year in 2016 at $3.41 trillion, due to currency fluctuations triggered by the Brexit episode.
Currently, Accenture carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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