Accenture Plc. (ACN) is steadily progressing on its strategy to grow through acquisitions. Recently, the company acquired ASM Research, Inc., the advanced information solutions and services provider.
The acquisition will help Accenture expand its capabilities and opportunities with the help of the Department of Defense (DoD) and Veterans Affairs (VA). Post acquisition, ASM Research will become a wholly-owned subsidiary of Accenture’s Financial Services (AFS). The company did not disclose the terms of the deal, which is to undergo regulatory review and other customary closing conditions.
Accenture is of the opinion that this strategic acquisition will grow its healthcare business across North America. Moreover, through this acquisition, Accenture would be able to utilize the thirty years of experience ASM Research has in the government vertical and its expertise in healthcare IT, information solution and services, data analytics, cloud computing, human capital management and agile software development.
A survey by the outsourcing and consulting services provider reveals that the demand for its services from sectors, like healthcare are increasing.
These acquisition strategy decreases the risks posed by the slow-performing major economies, which currently provide around 80% of Accenture’s total revenue. However, a stronger government business is a positive because government spending on IT, especially in areas such as healthcare, is likely to continue.
The recent acquisitions have helped Accenture enter different business segments and improve its technological base. Also, it has been able to improve its customer base, bookings and performance in the insurance, banking and healthcare sectors. This also reflects strong demand for Accenture’s services, which is in turn favorable for its long-term growth prospects.
On the other hand, stiff competition from Cognizant Technology Solutions Corp. (CTSH) and IBM Corp. (IBM), a strained spending environment and Accenture’s broad European exposure (roughly 40.0%) may temper its growth to some extent.
Currently, Accenture carries a Zacks Rank #3 (Hold). Investors can also consider other technology stocks such as Huron Consulting Group Inc. (HURN) and Information Franklin Covey (FC). Both the companies carry a Zacks Rank #2 (Buy).
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