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Growing Accenture Targets More Acquisitions

Rick Saia

A financially robust Accenture, nearing the end of a quarter that has seen it add to its technology capabilities with several acquisitions, expects to do more of the same as the channel behemoth focuses more of its resources on digital, cloud and security solutions, its top executives said Thursday.

"This is what [we have been] working on the last few years," Chairman and CEO Pierre Nanterme said in a conference call with analysts after addressing the company's financial results for the third quarter of its 2016 fiscal year. "I'm very pleased with the momentum that we are creating."

Accenture -- No. 2 on CRN's 2016 Solution Provider 500 list -- has acquired about 20 companies dating back to April 2015. During the third quarter, which ended May 31, it bought a majority stake in IMJ Corp., a full-service digital agency based in Japan, and announced the acquisition of OPS Rules, a small analytics consultancy based in Waltham, Mass.

[Related: Accenture Bulks Up New Security Unit By Scooping Up Israeli Firm]

All told, Accenture's acquisitions during the quarter cost the company about $835 million, CFO David Rowland said.

Earlier this week, the Dublin-based multinational management consulting services provider boosted its cybersecurity capabilities by acquiring privately held Maglan, a Tzur-Yigal, Israel-based company that's targeted to become part of a global network of cybersecurity centers. That announcement coincided with the hiring of a longtime Deloitte executive to lead Accenture's new efforts in cybersecurity, from which the company foresees annual revenue of more than $1 billion.

Nanterme called the investments in the technology areas "the right growth strategy," and said to expect more, citing Accenture's "appetite" for growth, with "relevant acquisitions" a part of that plan.

Digital, cloud and security-related services accounted for about 40 percent of company revenue in the third quarter, representing what it called strong double-digit growth. While those IT sectors will continue to be areas of focus, Nanterme also said Accenture is considering potential acquisitions in the growing field of artificial intelligence.

Accenture saw a higher rate of growth during the quarter from its consulting services (net revenue up 12 percent, to $4.62 billion) than its outsourcing services (up 4 percent, to $3.81 billion). In fact, the company said 54 percent of its $9.1 billion in new bookings during the quarter were for consulting services; 46 percent for outsourcing.

That, Nanterme said, is tied to a heavy level of transformation going on in all industries, which lends itself to higher demand for consulting. Years ago, he said, when there was less of a need to transform, businesses leaned more toward outsourcing.

For its third fiscal quarter, Accenture reported $8.43 billion in revenues, up more than 8 percent from $7.77 billion in the same quarter in 2015. That beat the consensus analyst estimate of $8.34 billion, according to Meanwhile, its diluted earnings per share, $1.41, rose nearly 14 percent, in line with the consensus analyst estimate.

For the fourth quarter, Accenture foresees revenue in the range of $8.25 billion to $8.5 billion. (StreetInsider’s estimate is $8.39 billion.) For the full 2016 fiscal year, the company increased its net revenue growth guidance to a range of 9.5 percent to 10.5 percent, from 8 percent to 10 percent. It also foresees adjusted earnings per share in the range of $5.29 to $5.33, in line with consensus estimates and up from its previous forecast range of $5.21 to $5.32.

In North America, Accenture’s overall business grew 10 percent, to just over $4 billion, during the quarter, the company said.

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