Accenture Continues Inorganic Growth With SolutionsIQ Buyout

Right after announcing the buyout of LabAnswer last week, Accenture Plc (NYSE:ACN) stated that it has now acquired SolutionsIQ, a provider of Agile transformation solutions for business and technology. The move is part of Accenture's efforts to enhance its digital marketing capabilities through Agile methods. Financial details of the transaction were kept under wraps.

Motivation Behind the Acquisition

SolutionsIQ provides Agile Transformation Solution to improve performance which includes effective digital delivery and shortened cycle time for software development which helps to address the other business needs. The solution helps in improving customer experience and thereby enhances the overall business value.

According to Bhaskar Ghosh, group chief executive of Accenture Technology Services, “This acquisition brings tremendous value to Accenture and our clients.” He further added, “Today Agile is more than just a software development methodology. SolutionsIQ coaches will expand our ability to help clients reduce investment risk, accelerate time to market for new products and services, and support design that delivers better customer experiences.”

With this acquisition, the company will be able to help clients in creating, managing, integrating and analyzing value-focused solutions, thereby reducing cost and giving clients heightened responsiveness to change.

Acquisitions – A Key Growth Strategy

Accenture pursues strategic acquisitions to diversify its offerings and expand operating markets. Last year, the company completed or signed about 12 acquisition deals across various business segments, including IT security, CRM capabilities and strategy consulting. In 2015, it closed 21 takeovers.

These acquisitions have enabled Accenture to foray into newer markets, diversify and broaden its product portfolio and maintain a leading position in the market. A strong cash balance of $3.24 billion and an operating cash flow of $1.24 billion at the end of second-quarter fiscal 2017 are expected to support Accenture’s inorganic growth strategy.

Share Price

Shares of Accenture have outperformed the Zacks categorized Consulting industry over the last one year. The stock has gained 5.05% compared with the industry’s gain of 4.36%.

Bottom Line

Accenture’s long-term prospects look promising due to its sustained focus on innovative product launches, continuous investments in enhancing digital and marketing capabilities and major acquisitions. Moreover, we believe that regular acquisitions will significantly contribute to the company's revenue stream.

Accenture’s recent announcement of creating 15K new jobs by 2020 and investment plan of $1.4 billion for employee training and opening of 10 innovation centers across the U.S. cities may dent its bottom-line results. Increasing competition from the likes of DXC Technology Company (NYSE:DXC) and Cognizant Technology Solutions Corporation (NASDAQ:CTSH) , and an uncertain macroeconomic environment may deter the company’s growth to some extent.

Accenture currently carries a Zacks Rank #4 (Sell).

A better-ranked stock in the consulting industry is NV5 Global Inc. (NASDAQ:NVEE) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term expected earnings per share growth rate for NV5 Global is 20%.

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