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Accenture (ACN) Closes Acquisition of 47.4% Stake in OCTO


Accenture Plc ACN recently announced the completion of its pending acquisition of 47.4% stake in OCTO Technology. The global IT services provider had announced this acquisition in September this year. The move is believed to be a part of Accenture's efforts to enhance its digital marketing capabilities in France.

The aforementioned stake has been purchased from François Hisquin, founder and CEO of OCTO, other managers and Financière Arbevel at a price of €22.50 per share and €1.7222 per equity warrant.

Notably, at this offer price, OCTO’s 100% ownership valuation comes to approximately €115 million. Accenture has further revealed that its two representatives – Christian Nibourel and Jean-Pierre Bokobza – have joined the supervisory board of OCTO.

The price of €22.50 per share represents roughly 43.8% premium over OCTO’s closing stock price on Sep 14, 2016. It also represents roughly 36.9% premium of OCTO’s weighted average share price during the last three months before Sep 14.

Accenture also disclosed that Sycomore Asset Management has agreed to sell its 233,445 OCTO shares. This will bring Accenture’s total ownership in OCTO to 52%.

The company further revealed that its wholly-owned subsidiary Accenture Digital France Holdings, will file to buy the remaining shares of OCTO at the same price and same terms with The Autorité des marchés financiers (AMF), the stock market regulator of France.

Acquisition Benefit

OCTO Technology is a technology consultancy focusing on digital transformation and software development. The company employs more than 320 people in five countries namely France, Brazil, Switzerland, Morocco, and Australia.

Upon successful completion of 100% ownership, OCTO will join Accenture Digital. The acquisition will help Accenture’s clients gain access to a greater number of professionals specializing in digital e-commerce solutions.

Accenture’s OCTO acquisition underscores its expansion efforts in France. OCTO’s capabilities will complement Accenture Digital’s end-to-end services in this region and will help it to penetrate the market.

Acquisitions – A Key Growth Strategy

Accenture pursues strategic acquisitions to diversify its offerings and expand operating markets. So far this year, the company has either completed or has signed about eleven acquisition deals across various business segments, including IT security, CRM capabilities, strategy consulting, etc. Last year, it had closed 21 takeovers.

These acquisitions have enabled Accenture to foray into newer markets, diversify and broaden its product portfolio, and maintain its leading position. A strong cash balance of $4.91 billion and an operating cash flow of $4.58 billion at the end of fiscal 2016 will support Accenture’s inorganic growth strategy.

Bottom Line

We are encouraged by Accenture’s strategy of growing through acquisitions. These buyouts have enabled the company to foray into newer markets, diversify and broaden its product portfolio, and maintain a leading position. We believe that regular acquisitions will significantly contribute to the company's revenue stream. This will also enable the company to effectively compete with other digital marketing service providers such as International Business Machines Corp. IBM, Dell and Deloitte.

However, increasing competition from Cognizant Technology Solutions CTSH, a strained spending environment and Accenture’s broad European exposure may temper its growth to some extent.

Shares of Accenture have been steadily treading higher on a year-to-date basis. The stock generated a return of 15.54% compared with the Zacks Consulting industry gain of 14.16%.

Currently, Accenture has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Another stock worth considering in the Consulting Services space is CoreLogic Inc. CLGX, sporting a Zacks Rank #1. The stock has witnessed upward estimate revisions in the last 60 days and has surpassed the Zacks Consensus Estimate thrice in the trailing four quarters with an average positive surprise of 4.65%.

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