Accenture Grows with Acquisitions (Revised) - Analyst Blog

Technology outsourcing and consulting major Accenture Inc. (ACN) recently acquired another Philadelphia-based consulting company, Knowledge Rules Inc., which focuses exclusively on implementing and integrating business solutions using Pegasystems' Business Process Management (BPM) software. The company did not disclose the financial terms of this transaction.

The consulting major already has a BPM division, which helps in running customers' business processes. This acquisition is expected to help Accenture enhance its Pegasystems capabilities specifically in the U.S. and European markets. Moreover, the enhancement of technical capabilities and training intellectual property developed by Knowledge Rules will enable Accenture to help clients optimize their Pegasystems implementations.

Many companies are adopting these Pegasystems SmartBPM products, which may result in its accelerated growth in the coming year. We believe that Accenture is on an acquisition spree, as the company recently disclosed its intension to acquire Ariba's (ARBA) sourcing business for a total consideration of $51.0 million.

Ariba is the leading provider of cloud-based business commerce software, which manages costs, minimizes risk, improves profits and enhances cash flows and operations of several organizations. We believe this acquisition will take the company's cloud computing ambition a step ahead in the coming years.

Accenture recently delivered a solid quarter and raised its earnings guidance going forward. The company also has a rock solid balance sheet and produces tons of excess cash flow, which it has used to return value to shareholders through stock buy backs and dividend increases.

We believe that Ariba's expertise will enhance the existing level of Accenture's consulting and outsourcing services, thereby increasing customer demand, which was noticed in the fourth quarter results.

Accenture posted impressive fourth quarter results having beaten the Zacks Consensus Estimate and registered solid bookings. Moreover, the company's business flow also remains encouraging. However, we are cautiously optimistic on the company until revenue growth shows a more sustained momentum.

We currently have a short-term Buy recommendation on Accenture, implying a Zacks #2 Rank.

Note: We have made a correction to this post. The original post erroneously implied that Accenture would be acquiring Ariba, while the deal is actually to acquire Ariba's sourcing business only.