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Accenture (ACN) to Benefit From umlaut Buyout: Here's How

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Accenture plc ACN yesterday announced that it has inked a deal to acquire umlaut, a Germany-based engineering consulting and services firm. The deal closure is subject to customary closing conditions. Financial terms have been kept under wraps.

Headquartered in Aachen, Umlaut’s offerings include traditional and digital engineering services; testing and validation of smart connected products; strategy, process and organizational consulting; and hardware product development as well as software development.

So far this year, shares of Accenture have gained 9.4% compared with 11.4% rise of the industry it belongs to and 13.8% growth of the Zacks S&P 500 composite.

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How Will Accenture Benefit?

The deal closure will see the joining of more than 4,200 industry-leading engineers and consultants across 17 countries into Accenture’s Industry X services. This is expected to boost the company’s potential across industries like automotive, aerospace & defense, telecommunications, energy and utilities.

The move will significantly enhance Accenture’s engineering abilities. It will increase Accenture’s quality of assistance toward companies in using artificial intelligence, cloud and 5G technology, and also improve production process.

Considering the current scenario of COVID-19-induced increasing dependency on technology, the latest deal is expected to be a strategic move on Accenture’s part to expand its Industry X capabilities by combining the power of digital with traditional engineering services.

Notably, Julie Sweet, chief executive officer, Accenture, stated, "COVID-19 has accelerated the need for companies to transform these core operations, and umlaut’s leading and highly-specialized engineering services will enhance our ability to meet the accelerating demand and also continue innovating for our clients."

Nigel Stacey, global lead of Accenture Industry X, stated, "Bringing world-class digital engineering and manufacturing expertise to our clients helps them rapidly scale, accelerate growth, improve productivity and safety, and embed sustainability across their operations."

Further, umlaut complements Accenture’s prior initiatives in strengthening its Industry X capabilities globally. Since 2017, the tech giant has completed 22 acquisitions to boost its Industry X capabilities. Some of Accenture's latest acquisitions include Electro 80 (Australia) on May 3, Pollux (Brazil) on Apr 8, Myrtle (United States) on Oct 9, 2020 and SALT Solutions (Germany) on Oct 30, 2020.

Zacks Rank and Stocks to Consider

Accenture currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Zacks Business Services sector are Equifax EFX, Charles River CRAI and TransUnion TRU, each carrying a Zacks Rank #2 (Buy).

The long-term expected earnings per share (three to five years) growth rate for Equifax, Charles River and TransUnion is 14%, 15.5% and 20.9%, respectively.

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