Accenture Bolsters Its Interactive Marketing Platform With Two Acquisitions

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Accenture

Quick Take

  • Accenture acquires Fjord and Acquity Group to bolster its Interactive Marketing Platform.
  • These acquisitions are of strategic importance to Accenture as now the company can provide comprehensive digital marketing solution to its clients across different platforms such as mobile, tablets, PCs etc
  • Digital marketing spending is on the rise and as companies look to increase their ad spend online and these acquisitions will enable Accenture to capture a larger chunk of this spend.
  • We expect Accenture’s new business ventures in marketing and mobility will be key revenue driver for 2013 and beyond.

Accenture (NYSE:ACN) announced that it had acquired two companies in May to strengthen its interactive marketing platform. While Accenture acquired online marketing company Acquity Group Ltd for $316 million in an all cash deal, its acquisition amount for UK based design Agency Fjord was undisclosed.

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Acquity Group provides strategy, digital marketing, and technical services to  companies to enhance their brand experiences and eCommerce performance. Once the acquisition is complete, Acquity Group’s more than 600 employees are expected to join Accenture Interactive. Additionally, Fjord will supplement Accenture’s interactive services by providing mobility and design capabilities for marketing across hybrid platforms (smartphones, tablets and PCs) and for creating dynamic services.

Following the integration of these companies, Accenture Interactive, Fjord and Acquity Group are expected to offer a comprehensive digital marketing solution that would help clients to formulate marketing and ecommerce strategies. Accenture had stated in its latest results that new business offerings in social media, mobile computing, analytics and the cloud will improve margins in 2013 and beyond.

See our full analysis on Accenture

Why Are These Acquisitions Important

Digital Marketing is gaining momentum as companies are increasing spend on it. According to IT research firm Gartner, firms generally spend 2.5% of their revenues on digital marketing and the spending is expected to increase by 9.0% in 2013. [1] Importantly, according to Gartner, 50% of the digital marketing activities get outsourced.

Additionally, web traffic from mobile devices is on the rise and mobile marketing is expected to increase as advertisers look to tap into users accessing the internet through smart mobile devices. Gartner has predicted that worldwide mobile ad revenue will exceed $11 billion in 2013, and that the growth rate for ad revenue will exceed 400% during 2011-2016. [2]

Accenture is already amongst the leader in management consulting. Currently, the consulting services arm of Accenture has revenues of nearly $6.2 billion and as the digital marketing market grows, it can meaningfully impact Accenture’s top-line in the near future. Accenture Interactive, its digital marketing analytics and strategies unit, enables companies to manage their marketing costs, improve marketing strategies and enhance customer experience. These acquisitions become important in light of the fact that Accenture is aiming to increase its revenues from new business ventures in marketing and mobility.

Acquisition To Bolster Accenture’s Interactive Marketing Platform

While Acquity Group is the second-largest independent digital marketing company in the United States and has revenues of nearly $141 million, Fjord is a UK based firm that in the past has designed mobile apps for improving customer experience for blue chip customers such as Nokia, Citibank, Paypal etc. We expect that revenues at both the companies will grow substantially as it is now backed by Accenture’s global reach. Moreover, these acquisition further enhances Accenture Interactive’s ability to help CMOs create distinctive customer experiences and bring them to market with speed.

We had stated earlier that Accenture’s new business ventures in analytics, digital marketing and mobility will help drive growth in 2013. In its most recent earnings call, the company guided operating margins will be at 15% for 2013 due to these initiatives. [3] We expect Accenture will be able to leverage the existing client base of these companies to improve its footprint in the growing digital marketing vertical.

We currently have a $67 Trefis Price Estimate for Accenture which is 18% below its current market price.

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Notes:
  1.  US Digital marketing spending report, 2013, April 13 2013, www.gartner.com []
  2. Gartner Worldwide Mobile Advertising Revenue, January 17 2013, www.gartner.com []
  3. See Accenture’s Results Show Outlook Steadily Improving []