Accenture Looks To Boost Consulting Division Revenues With The Recent Acquisitions
Accenture (NYSE:ACN) has been struggling with the impact of the high U.S. dollar as currency effects largely offset growth in revenues and signings in reported results. This is evident from its fiscal Q3 results. [1] (Fiscal years end with September.) In Q3, Accenture reported that its consulting revenues grew by 1% year over year to $4.11 billion in USD (up 11% in constant currencies), mostly from order backlog or old signings. New signings for consulting were at $4.5 billion, mildly better than the year before. Total signings were understated by then percentage points with currency effects.
With earnings, Accenture raised its full-year revenue growth forecast for the third time. It now expects net revenue growth in local currency to be in the range of 9% to 10%, compared with 8% to 10% previously. The company plans to outperform the growth in consulting by acquiring competing firms in different verticals. Recently it has announced that it was acquiring Schlumberger Business Consulting, Total Logistics and FusionX. In this note, we explore these acquisitions and how these will help Accenture to increase its consulting revenues.
See our full analysis for Accenture
Acquires Fusion-X For Security Consulting Services
On 4th of August, Accenture announced that it acquired FusionX, a Washington, DC-based cybersecurity firm. [2] While financial terms of the deal were not disclosed, speculation is rife that security vendors have enjoyed a significant amount bargaining power due to the ongoing raft of cyber attacks and data breaches. Recently, Microsoft acquired the Israeli cloud security provider Adallom for $320 million, while Spunk bought security startup Caspida for $190 million.
The press release said “FusionX will join and augment Accenture’s growing global Security team. By combining FusionX’s expertise in identifying security vulnerabilities with Accenture’s industrialized suite of security transformation and operations offerings, the acquisition will allow clients to more effectively manage risk and improve business results.”
According to Markets and Markets, cyber security market would grow from $106.32 Billion in 2015 to $170.21 Billion by 2020, at a Compound Annual Growth Rate (CAGR) of 9.8%. [3] It also expects North America to generate the highest revenue for the cyber security market during the entire forecast period, while significant revenue growth is expected from Latin American and Asia-Pacific regions.
Considering that FusionX works with Fortune 100 organizations in financial services, critical infrastructure, technology, government and manufacturing, Accenture is well positioned to augment its consulting revenues from cyber security services. This would help the company to shore up its consulting revenues, which have been flat over the past two years, as reported.
Acquires Total Logistics For Management Consulting and Technology Consulting Capabilities in Retail Supply Chain and Logistics
On 17th August, Accenture announced that it had successfully acquired Total Logistics, an independent logistics and supply chain consultancy based in Wokingham, UK. [4] The company said that Total Logistics will be assimilated into its consulting unit. Accenture plans to leverage Total Logistics’ supply chain and logistics strengths to support clients in the retail and consumer goods industries. Going forward, Accenture plans to extend Total Logistics’ capabilities to other industries, including life sciences, automotive and industrial equipment.
Total Logistics is the second acquisition that Accenture has made in the UK to strengthen its retail and consumer goods capabilities and enhance its strategic consulting capabilities in supply chain and logistics. In June, the company acquired Javelin Group, a UK-based retail strategy consulting and digital transformation services provider.
According to Gartner, supply chain management (SCM) and procurement applications outpaced most software markets and grew by 10.8% in 2014 to $9.9 billion. [5] Considering that the SCM market is fragmented, with the top 10 vendors maintaining about 55% of total market share, consolidation is underway. Accenture recognizes the underpinning in the industry and hopes to capitalize on the growth in the industry by acquiring companies in this vertical. We believe that as the company improves its capability in SCM industry, its revenues from consulting in the industry can break the shackles of anemic growth in the future. We continue to monitor the revenue from this vertical for growth in the coming quarters.
Eyes Upstream Oil And Gas Consulting Capability With Schlumberger Business Consulting (SBC)
Accenture announced on August 17th that it has entered into an agreement to acquire Schlumberger Business Consulting (SBC), the management consulting unit of Schlumberger, a global leader in oilfield services. [6] Terms of the acquisition were not disclosed, and completion of the acquisition is subject to regulatory approval and other customary closing conditions.
SBC provides consulting services in strategy, operations, people & transformation, capital projects, and mergers & acquisitions The upstream oil and gas sector is undergoing a fundamental transformation, driven by oil price volatility, increased regulation and technological advances. As a result, strategy consulting in upstream oil has been a lucrative business and SBC has become a leader in the industry since its inception in 2004. The acquisition will expand the capabilities of Accenture’s strategy consulting unit in helping the world’s major exploration and production companies to tackle the challenging business environment. Furthermore, this acquisition will help Accenture to improve and diversify its revenues from oil and gas sector. We continue to monitor the revenues from oil and gas sector for Accenture in the coming years.
At present, we have a $79.56 price estimate for Accenture, which is 15% below its current market price.
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More Trefis Research
- Read our earnings review from late June here. [↩]
- Accenture Acquires FusionX, Further Bolstering Ability to Help Clients Assess and Respond to Advanced Cyber Threats, August 4 2015 [↩]
- Cyber Security Market worth $170.21 Billion by 2020, June 2015 [↩]
- Accenture Acquires Total Logistics, Adding Powerful Management Consulting and Technology Consulting Capabilities in Retail Supply Chain and Logistics, August 17 2015 [↩]
- Gartner Says Worldwide Supply Chain Management and Procurement Software Market Grew 10.8 Percent in 2014, May 12 2015 [↩]
- Accenture to Acquire Schlumberger Business Consulting (SBC), the Management Consulting Arm of Schlumberger, to Expand Accenture Strategy Capabilities in Upstream Oil and Gas, August 17 2015 [↩]