In the last several days, Accenture – a firm that has largely focused on organic growth strategies and avoided significant inorganic expansion activities – announced two acquisitions: Zenta, a U.S. mortgage processing firm, and Duck Creek, a provider of software solutions for the property and casualty insurance industry.
When Accenture does occasionally make acquisitions, it has followed a policy of buying tuck-in properties which allow it to build IP or enter new markets. Both of these acquisitions fit Accenture’s historical pattern by adding capability and IP which extend its transformational offerings. In this case, Accenture is adding an attractive mortgage processing platform from Zenta and important IP in the property and casualty arena from Duck Creek. Both of these additions more strongly position Accenture in attractive industries currently undergoing substantial transformation.
Taken together, these acquisitions may be heralding an increasingly acquisitive stance by Accenture, while at the same time demonstrating that at least some private equity firms are exiting the space. Historically, Accenture has been a value buyer, with these recent announcements appearing to fit that pattern. What’s unexpected is that the exiting PE firms are accepting modest valuations as compared to the high multiples often offered through a public offering.
The increased rate of inorganic activity from Accenture, combined with PE firms’ willingness to take reduced multiples, are consistent with a maturing market in which traditional powers adjust their strategies to take advantage of and accommodate new realities.
What other changes do you see coming to the industry? Does this signal a new round of consolidation? Will Accenture divest Zenta’s commoditized services lines? If so, which firms will pick up those assets? Will less attractive valuations of properties slow the rate of investments into the space by PE firms?