Technology, consulting and outsourcing company Accenture Plc. (ACN - Analyst Report) has actively pursued acquisitions to drive growth.
This strategy has served it well in the high-growth emerging markets of India, the Philippines, China and Latin America. Also, the company is making its presence felt when it comes to local clients in the emerging economies. Additionally, acquisitions have helped Accenture diversify its portfolio and spread the risk of exposure to underperforming regions.
Europe’s weak economic condition is perceived to be an opportunity for some meaningful acquisitions. There are options for potential acquisitions in the euro zone at competitive prices, which can reap long-term benefits.
Accenture conducted a survey of 450 executives globally, 96.0% of which are from companies with revenues of $1 billion or more. The study also found that 58.0% of the German respondents are planning acquisitions at this time. Additionally, 57.0% of Spanish firms and 36.0% of the French companies have similar plans. Therefore, the company intends to tap this opportunity.
Accenture is also focusing on acquisitions based on utility. This led it to acquire the digital production services vendor avVenta Worldwide. Accenture closed the acquisition without disclosing the terms of the agreement.
The digital production services offered by Accenture to the chief marketing officers (CMOs) with the help of Accenture Interactive will be augmented with the integration of avVenta’s digital production solutions. Accenture will be using avVenta’s delivery center in San Jose to provide cost effective solutions to clients.
We are encouraged by Accenture’s strategy to expand through acquisitions. However, increasing competition from IBM Corp. (IBM - Analyst Report) , Infosys Ltd (INFY - Analyst Report) and Tata Consultancy Services and a strained spending environment may affect its growth potential.
Moreover, economic slowdown, increasing regulation as far as government contracts are concerned and ever increasing problems with subcontractors continue to bother Accenture.
Currently, Accenture has a Zacks #3 Rank (short-term Hold rating).