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May 20, 2021updated 09 Dec 2021 1:18pm

Accenture cloud capabilities stronger as company leads in M&A activity

By GlobalData Thematic Research

The global IT services and consulting company Accenture tops in the list of acquirers in 2021 year to date (20th May) in global mergers and acquisitions (M&A) market in tech media and telecom (TMT) sector. Accenture has made several strategic investments over the past two years as it seeks to enhance its IT services capabilities, especially in the field of cloud. Accenture has been acquiring several cloud companies this year as part of its $3 billion Accenture Cloud First initiative. The latest acquisition was that of the strategic management consultancy Homburg & Partner, which will allow Accenture to expand its capabilities in commercial strategy, sales and pricing. This deal was announced on 18th May 2021.

As per GlobalData’s latest report on M&A in TMT, which evaluates deals with a transaction value of at least $50mn or more, in the global IT services sector saw around 65 deals worth $38bn in year 2020, while there were 68 deals with a total transaction value of $34bn in 2019.  It is expected that this year the sector may see a record-breaking year of M&A activity.

IT services companies focus is on M&A activity

2021 is seeing a number of major IT services companies focus on M&A activity, with Accenture leading and then followed by Atos. Accenture spent nearly $1.5 billion globally on 34 acquisitions in its 2020 fiscal year. This year, as part of its $3bn Accenture Cloud First initiative, it aims to help businesses with deploying cloud-first infrastructures and driving their digital transformation.

Accenture Cloud First includes a multiservice group of 70,000 cloud professionals out of the company’s 537,000 global employees. The IT company has announced 20 acquisitions in 2021 so far, and out of these more than half of the targets were cloud services companies. The majority of these deals were 100% acquisitions. With 2021 not even halfway through, we must wait and see what and how much more Accenture is willing to spend on deals.

Other than cloud, the other themes under focussed by Accenture were cybersecurity, industrial automation, and supply chain. The company is addressing all these themes, although cloud is the clear focus this year. The latest cloud company acquired was Linkbynet. This deal will strengthen Accenture Cloud First capabilities with Linkbynet’s deep cloud and engineering specialization, managed services, sophisticated technology tools and cybersecurity intelligence.

The 2021 acquisition spree

Many IT services providers such as IBM, Cognizant, Capgemini, Atos, and Wipro also have been on an acquisition spree over the last few months. This surge is driven by two key factors; one to bolster the acquirer’s capabilities amid the Covid-19 pandemic; and second is to expand their services globally. Buying companies in strategic areas such as Cloud platform implementation and AI-based products and services has been very beneficial to these IT service providers during this pandemic.

Other than Lunkbynet, other cloud related acquisitions were ThinkTank, AppsPro, Core Compete, Infinity Works, Edenhouse, Businet System, Imaginea and Wolox. As AI has remained a key focus area for tech giants and an area of growing competition, so this space has seen an acquisition spree by the leading IT services companies.

Accenture gains a competitive edge

Accenture has also been active and stands second after Apple with 17 acquisition in AI since 2016 to 2020. Accenture has also made a strategic move by not only focusing on one particular region but acquiring companies across the globe.

Accenture generated $12.2 billion in revenue during its second-quarter 2021, which ended February 28, representing an increase of 8%year on year. The company generated roughly 20% of its revenues from cloud in 2020, a figure the company hopes to be around 80% by 2025. COVID has hit a giant fast-forward button and has caused an acceleration in the adoption of cloud, AI and other disruptive technologies.

These deals can help provide Accenture with a competitive edge over other leading cloud services companies such as IBM, HCL, and Cognizant.