Tag: mergers & acquisitions

Altran to Boost Capgemini’s ER&D Outsourcing to India | In the News

Capgemini’s plan to acquire engineering consulting firm Altran for €3.6 billion ($4.1billion) could boost growth in the Indian engineering services market, analysts said.

There is greater potential in engineering services and India has an adequate talent pool, said Peter Bendor-Samuel, chief executive of US-based IT advisory firm Everest Group. “The best source of engineering talent in the world is India and we expect Capgemini, through its Altran acquisition, to significantly expand its India workforce over the next several years. We believe that India will be the primary beneficiary as a destination for this work,” he said.

Read more in Economic Times

Accenture’s Acquisition of Genfour is Harbinger of More M&A to Come | Sherpas in Blue Shirts

Accenture announced today that it has acquired Genfour, the pureplay automation integration and professional services company, for an undisclosed amount. Everest Group research indicates that Genfour is growing fast more than doubling revenue year on year but that is the norm in a growth market that is currently dominated by RPA technologies. Revenue mix includes annuity, run and operate as well as consultancy. The company head count includes a large developer pool. Genfour has a strong presence in the insurance and utilities sectors, as well as a few clients located in the US.

Acquisition of additional automation skills likely a key driver

Genfour works with a number of Service Delivery Automation (SDA) technologies, Blue Prism, UiPath, and Celaton. It also has its own Genfour Autonomic platform with multi-tenant features and interfaces to third party workflow and reporting software. It not only develops and deploys automation for clients but offers on-going as-a-service operation and support services.

Automation skills are in short supply in the market, and Genfour brings Accenture expert personnel. This is likely to be the main reason for the acquisition.

Client acquisition is unlikely to have been a driver for this take over given that many of Genfour’s clients are mid-sized organizations that are not usually targeted by Accenture. However, Genfour’s presence in the insurance sector might have helped.

In terms of technology, the two companies’ capabilities mostly complement each other. Accenture has built extensive automation capabilities in recent years by following a strategy of partnering with leading automation technology vendors, Blue Prism and IPsoft among them. While the two companies share expertise in Blue prism, and to some extent, UiPath, Genfour adds Celaton and its own IP to the Accenture mix.

Expect the M&A trend to continue

The market is moving towards increasing levels of domain and industry specific automation. Accenture is likely to follow this trend and build capabilities for specific domains and vertical expertise as well as increasingly more complex projects.

It is unsurprising that there is M&A activity in this market. We have predicted this, and there is more to come. This acquisition is unlikely to be the last in SDA in 2017.
Check out Everest Groups’ RPA market and technology trends and predictions in our latest webinar download.

Future of Healthcare IT Outsourcing Market Hinges on US Election, Department of Justice Verdict | Press Release

Healthcare payers choose wait-and-see strategy for mergers, health insurance exchanges; focus on security, integrated operations is full steam ahead

The outlook for the global healthcare IT outsourcing (ITO) market is hanging in the balance, with all eyes watching to see the outcome of the U.S. presidential election and the verdict of antitrust proceedings filed by the U.S. Department of Justice opposing the proposed Aetna-Humana and Anthem-Cigna mergers. Despite these uncertainties, Everest Group predicts that the global healthcare ITO market will exhibit a 12 percent compound annual growth rate during the period between 2014 and 2020, reaching US$68.3 billion in 2020.

“This growth, a bright spot in an otherwise bleak IT outsourcing marketplace, will be driven primarily by healthcare payers as they gear up for various movements in the market, such as payer-provider convergence, patient-centric care, evolving reimbursement models and value-chain digitization,” said Abhishek Singh, practice director with Everest Group and leader of Everest Group’s Healthcare & Life Sciences research practice. “Tactically, payers need to evolve on their sourcing maturity journey. The cost and efficiency mandate will be best served by sourcing the best quality services at the lowest possible costs. In this regard, the maturing technology service provider landscape is ripe for payers to explore outsourcing in a big bang manner.”

Everest Group has identified four trends that will shape healthcare IT outsourcing demand in the next 24 months:

  1. Large mergers are being pursued in the healthcare payer market. As noted above, two such mergers are being held at bay by the U.S. Department of Justice, with antitrust proceedings slated to begin on December 5, 2016. Should the mergers proceed, they will (after an initial lull in demand) increase the IT consulting spend for merger planning and integration projects. Subsequently, the mergers will lead to vendor consolidation as the surviving entity attempts to eliminate redundant IT systems and processes.
  2. Disillusionment with health insurance exchanges (HIXs) will impact spending in the near future. Already, several payers are seeking market exit options from the HIX business due to heavy losses sustained in the past financial year. The U.S. presidential election in November 2016 will shape the outcome. Democrats are promoting HIX; Republicans are opposing it. Many factors such as subsidies, premium rates and private participation hang in the balance. Everest Group believes HIX will survive; however, the shape and size of the program will be determined by the largest national plans and by the new US presidential administration. In the meantime, payers have adopted a wait-and-see approach with regards to expanding, withdrawing or investing in the HIX market.
  3. Security is a top priority for more than 90 percent of CIOs. This will drive the next wave of tech spending. Recent high-profile data breaches combined with a shift in the enterprise perception of threats have given renewed impetus to security and a stronger demand for ROI accountability.
  4. Integrated operations is the way forward for large healthcare IT outsourcing deals in the mid-market. Service providers who are able to guarantee financial outcomes and predictable spend for adoption of integrated applications, infrastructure and processes will win the favor of payers.

Each of these trends—how they came to be and the implications they hold for payers, service providers and consumers—are discussed in detail in “Healthcare Payer IT Services: Outsource (Offshore) or Perish.” In this annual report, Everest Group analyzes the current trends and future outlook of large, multi-year ITO relationships in the healthcare payer market. The report also provides specific insights into enabling a go-to-market strategy for healthcare IT.

Capita Goes for Accelerated Growth with Xchanging Bid | Sherpas in Blue Shirts

This week we heard that Capita and Xchanging had agreed on the terms of a recommended cash offer of 160 pence per share. The offer values Xchanging at approximately £412m. If it goes ahead, the acquisition would be Capita’s largest ever; it is 260% bigger than its previous largest acquisition, that of avocis for £157m in February 2015.

Capita’s newly found appetite for larger acquisitions marks a noticeable change in approach between the current CEO, Andy Parker, and his predecessor, Paul Pindar. While Pindar went for niche acquisitions, Parker is going for accelerated inorganic growth.

If this bid goes through, it will impact Capita’s business in the following ways:

  • Significant leg-up in Insurance BPO: Xchanging is something of a jewel in the insurance sector due to its golden relationship with Lloyds of London as well as insurance sector specific technologies such as Xuber. Insurance services accounts for the larger part of revenue at circa 60%. For some time now Capita has been talking about growth in the insurance sector, setting the scene for more of its M&A activity. It has previously stated, “Where premium growth remains modest, (insurance) firms are focused on improving operational efficiency and organisational flexibility, areas Capita is well placed to help them address.” Before it made the offer for Xchanging, Capita had expanded its insurance capabilities through the acquisition of SouthWestern. This brought it 700 skilled, multi-lingual FTEs at two sites, Krakow and Lodz, providing services to insurance, finance and legal administration, and customer management across Northern Europe. Another relevant and recent acquisition was that of tricontes in 2014. The £6.2m acquisition of the Munich-based company in June 2014 brought Capita specialist contact centre services for various sectors including the insurance sector in Germany.

  • Bigger play in the private sector business: The split between Capita’s public and private sector business has always stayed roughly around 50:50 with annual variations of plus or minus 5%. In 2014 Capita’s private sector business was £2273.6 and accounted for 52% of revenues. With revenues of £406.8m in 2014, Xchanging could boost Capita’s private sector business by as much as 18% – a significant growth.

  • Entry into potentially lucrative BPO segments: Xchanging has good capabilities in the fast growing Procurement Outsourcing (PO) and Capital Markets BPO. Our analysis shows that both market segments are growing upwards of 10% CAGR. Further, these are specialized BPO segments and hence less prone to commoditization. However, to fully capitalize on the potential, Capita would have to address recent issues with Xchanging’s PO business.

  • Geographic diversification: This acquisition would help Capita expand its market presence beyond the UK. Some of the key countries where it could help Capita are Italy, Germany, and the U.S. While the scale may not be big, it can provide Capita a base upon which to build its international business. Further, continental Europe is a specialized market, which may not be the easiest to penetrate for an external service provider. Xchanging, with its multiple contracts in Germany, can help Capita in its entry in that geography.

  • Greater global sourcing leverage: Capita has around 5,000-6,000 FTEs in offshore location. This acquisition offers the potential of increasing this number by 20-25% primarily in India.

Clearly, this acquisition can help accelerate Capita’ growth and capabilities in multiple ways. However, as with any acquisition, successful integration will be key to harness the potential including effectively addressing recent issues.

Capita is not the only service provider to be eying growth in the insurance sector. With this bid, Capita’s acquisitive culture is set to give it an edge over the others.

For our previous coverage of Capita’s growth strategy see “Capita’s German Gambit.” 

Have a question?

Please let us know how we can help you.

Contact us

Email us

How can we engage?

Please let us know how we can help you on your journey.