On Oct 3, 2013, consulting and outsourcing company, Accenture (ACN) announced the completion of its acquisition of Procurian for $375 million.
The all-cash acquisition not only provides Accenture an edge over other service providers such as International Business Machines (IBM) and Infosys (INFY) in the procurement segment, but also eliminates a direct competitor. Moreover, Accenture can leverage Procurian’s core competencies in the procurement outsourcing market, with its various tools and applications, to gain new clients and serve the existing ones in a better manner.
Procurian, a subsidiary of ICG Group, Inc. (ICGE), is headquartered in King of Prussia, Pennsylvania, and provides comprehensive and strategic procuring and sourcing business process services. It acts as a sourcing partner to business process outsourcing (BPO) service providers such as Genpact and Capgemini. Procurian’s clients include the likes of Hertz and Kimberly Clark. Procurian has offices in the U.S., India, the U.K., the Czech Republic, China and Brazil and its 780 employees have been inducted into Accenture.
Moreover, Accenture has resorted to strategic acquisitions to diversify its offerings and expand its operating markets. The strong cash balance ($5.63 billion) and robust operating cash flow ($1.27 billion in the fourth quarter of 2013) enables the company to go for strategic acquisitions.
Accenture is regularly enhancing its client base, which has helped it to record strong bookings and witness robust growth across insurance, banking and healthcare segments.
However, a constricted spending environment and Accenture’s broad European exposure may temper its growth prospects to some extent. Moreover, competition from Cognizant and IBM are expected to remain the headwinds, going forward.
Currently, Accenture has a Zacks Rank #4 (Sell).