In a bid to expand its consulting services capabilities, Accenture plc ACN recently acquired Beacon Consulting Group. The financial terms of the deal, announced yesterday, remain under wraps.
Headquartered in Boston, MA, Beacon mainly focuses on advising global financial and investment firms. With approximately 50 professionals, the company offers expertise in middle- and back-office operations thereby helping organizations gain a competitive advantage and implement changes that could boost business performance.
Accenture intends to integrate the operations of Beacon under its Capital Market Practice business. The acquisition will help the company to expand its presence in the asset management space and gain market traction. Moreover, Accenture can leverage Beacon’s superior asset management capabilities to better serve its clients.
According to Beacon’s president, Keith Brown, “Top-tier asset management firms are facing increased competition, fee pressure from investors, rapidly changing investor preferences and products and ever-increasing regulation”.
Considering the growing need for strategy consulting, we expect Accenture’s investments in consulting capabilities to boost long-term growth. This will also enable the company to effectively compete with other consulting service providers, such as International Business Machines Corp. IBM, Dell and Deloitte.
Accenture pursues strategic acquisitions to diversify its offerings and expand operating markets. This month, the company has already taken over three companies, including Beacon. Moreover, so far this year, 21 buyouts have been completed.
A strong cash balance of $4.36 billion, operating cash flow of $4.09 billion and free cash flow of $3.7 billion at the end of fiscal 2015 supports the company’s inorganic growth strategy.
These acquisitions have enabled Accenture to enter newer markets, diversify and broaden the product portfolio and maintain a leading position. We believe that the company’s regular acquisitions will significantly contribute to its revenue stream.
However, we remain slightly cautious due to the intensifying competition and an uncertain IT spending environment, which may undermine the company’s performance in the near term.
Currently, Accenture carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the Consulting industry are Navigant Consulting Inc. NCI and NV5 Global, Inc. NVEE, both carrying a Zacks Rank #2 (Buy).
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