Cognizant Makes Second Deal After Activist Investor Criticism, To Buy 100-Person Insurance Consultancy
Cognizant plans to make its second acquisition since an activist investor called for a shake-up, agreeing to buy a 100-person Australian consultancy specializing in the insurance vertical.
Teaneck, N.J.-based Cognizant, No. 7 on the 2016 CRN Solution Provider 500, said its purchase of Sydney, Australia-based Adaptra will strengthen its insurance, business transformation and platform capabilities. Adaptra implements platforms such as Guidewire to help insurance companies drive improvements across areas such as underwriting, policy administration, claims management and billing.
"Increasingly, insurers around the world are looking to simplify critical processes relating to policies, claims and billing," Jayajyoti Sengupta, Cognizant's head of Asia-Pacific, said in a statement. "Adaptra's high-end business transformation and Guidewire expertise will … further enhance our integrated solutions spanning the insurance life cycle."
Adaptra works with five of the top 10 insurers in Australia and New Zealand, providing them with platform advisory and implementation services and helping them define their target business and operating models. Terms of the acquisition weren't disclosed, and Cognizant did not immediately respond to a request for additional comment.
Activist technology investment fund Elliott Management said in November that Cognizant has been slow to use cash to strengthen its digital footprint. Elliott Management said rival Accenture, No. 2 on the 2016 CRN SP 500, has put itself at the forefront of cloud and digital services by making 45 tuck-in acquisitions since 2014.
But Cognizant has not yet met that acquisition pace, making just eight acquisitions between 2014 and late November, when Elliott Management Senior Portfolio Manager Jesse Cohn wrote a letter to Cognizant's board of directors.
Elliott Management is pressing for Cognizant to use 25 percent of its annual U.S. free cash flow as well as $1 billion in foreign cash to make acquisitions, which Elliott Management said would fund a steady pace of 14 attractive tuck-in acquisitions. Adaptra is the second acquisition made by Cognizant since Elliott Management raised its objections, and comes just 17 days after Cognizant purchased Netherlands-based digital marketing agency Mirabeau BV.
Adaptra specializes in helping insurers increase their speed to market, transform core processing, drive product differentiation and digitally engage with customers, according to a company statement. Adaptra said Cognizant's global experience, deep digital capabilities and entrepreneurial culture will enable the IT services provider to deliver broader transformational solutions to insurers.
"Becoming a part of Cognizant uniquely positions us for new growth opportunities across newer technologies and industries," Peter Overton, managing director of Adaptra, said in a statement. "With our shared commitment to helping insurers navigate the shift to the digital economy, we can drive further diversification and deliver high-value solutions."
Prior to the deal, Cognizant had offices in Melbourne and Sydney and employed more than 850 people in Australia. The company recently unveiled plans to establish a Digital Business Collaboratory in Melbourne, where Cognizant employees, customers and partners can work together to design, prototype and build digital solutions.
Adaptra partnered with Cognizant rival Capgemini, No. 5 on the 2016 CRN SP 500, in November 2014 to drive innovation in the insurance industry through a preconfigured Platform-as-a-Service (PaaS) offering tailored to policy administration, billing services, claims management and business intelligence environments.
Adaptra was founded in 1998, and is the sister company of Nova IT, an IT recruitment and resource provider specializing in the financial services and government sectors.
Elliott Management's letter to Cognizant also called for the $13.5 billion solution provider to shake up its board of directors and buy back $2.5 billion of shares as part of what it called a value enhancement plan aimed at driving shares up by 50 percent to 69 percent over the next year.
Specifically, Elliott Management said Cognizant's lack of operating leverage is impairing its ability to make sound investments in mergers and acquisitions.
Cognizant's sales in the most recent quarter climbed to $3.45 billion, up 8.4 percent from $3.19 billion the year prior. Net income also improved to $444.4 million, or 73 cents per share, up 11.9 percent from $397.2 million last year.