Tag: private equity

Investor Elliott Management buys tiny stake in Wipro | In the News

Elliott Management, the activist hedge fund that changed Cognizant’s business strategy, has taken a tiny stake in WiproBSE 1.95 %, highlighting its interest in Indian IT companies. Of about 40 US-listed stocks that the $34-billion hedge fund owns, two are now from the Indian IT sector.

IT experts said the unprecedented disruption that the industry is going through makes it an attractive target and that there are three ways in which an activist could ask companies to improve shareholder value — by increasing margins as a result of cutting investment, overheads and sales costs; consolidation or accelerating the move to the digital model. “Option 1is by far the less risky and that is why it is favoured by the activist investors. Interestingly, the private equity community is increasingly interested in the industry and has already started to take positions in firms as well as taking them private. At this time the PE industry seems to be favouring options 2 and 3 and in some cases looking to combine them,” said Peter Bendor-Samuel, founder of Everest Research, an IT consultancy.

Read more in The Economic Times

Does Accenture’s Acquisition of Zenta and Duck Creek Signal Industry Maturation? | Sherpas in Blue Shirts

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?

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