In an attempt to explore opportunities in the energy, utilities and petrochemical sectors in the Middle East, Accenture plc (ACN) recently entered into an agreement to acquire a lion’s share in the Saudi Arabia-based Faisaliah Business & Technology Company (“FBTC”). Financial details of the agreement and the extent of stake-holding were not disclosed.
A unit of Al Faisaliah Group, FBTC is a renowned information technology (IT) services company. It provides IT consultancy services including Enterprise Resource Planning, corporate treasury solutions, E-Banking solutions, mobile sales and hand-held technology solutions, as well as business process re-engineering.
Post completion, Accenture will combine FBTC’s enterprise architecture, systems implementation and technology consulting skills with its management consulting and technology and outsourcing experience. The combined force will help Accenture to strengthen its position in the Middle East through services tailored to suit local industries.
The deal is expected to wrap up within 90 days. Management has not mentioned any financial impact of the deal in the coming quarters. But as both companies are in a similar line of business, we do not foresee a long integration process. The acquisition will also strengthen Accenture’s position in the Middle East.
We find the acquisition strategy of Accenture quite encouraging. While it increases the competitiveness of its services, it also widens the company’s geographic footprint.
Earlier this year, Accenture completed the acquisition of Germany-based customer relationship management and mobility software provider CAS Computer AG. Since then, Accenture has been capitalizing on CAS Computer’s intellectual property and global customer base.
Apart from acquisitions, we are also encouraged by the growth in revenue and bookings that Accenture recorded in the recently concluded third quarter of 2011.
However, competitive pressure from IBM Inc. (IBM) could considerably rationalize Accenture’s growth prospects.
Accenture has a Zacks #3 Rank, implying a short-term Hold recommendation.
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